MNI China Daily Summary: Wednesday, March 8

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY4 billion of operations via 7-day reverse repos on Wednesday, with the rates unchanged at 2.00%. The operation led to a net drain of CNY103 billion after offsetting the maturity of CNY107 billion reverse repos today, according to Wind Information. The operation aims to keep banking system liquidity reasonable and ample, the PBOC said on its website.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) increased to 1.9200% from the close of 1.8823% on Tuesday, Wind Information showed. The overnight repo average increased to 1.6200% from the previous 1.4229%.

YUAN: The currency weakened to 6.9706 against the dollar from 6.9268 on Tuesday. The PBOC set the dollar-yuan central parity rate higher at 6.9525, compared with 6.9156 set on Tuesday.

BONDS: The yield on the 10-year China Government Bond was last at 2.8950%, unchanged from Tuesday's close, according to Wind Information.

STOCKS: The Shanghai Composite Index edged down 0.06% at 3,283.25, while the CSI300 index decreased 0.36% to 4,034.11, The Hang Seng Index was down 2.35% to 20,051.25.

FROM THE PRESS: China will create a new national financial supervisory authority to replace the China Banking and Insurance Regulatory Commission in an overhaul of its financial regulators to enhance supervision and strengthen risk management, according to Caixin. The new regulator will report directly to the State Council and will be responsible for ensuring investor protection, and will assume supervision of large companies from the People’s Bank of China. The new authority will not be responsible for the management of the capital markets, which stays with the China Securities Regulatory Commission (CSRC). However, the CSRC will now also report directly to the State Council, according to Caixin.

China has reinstated the People’s Bank of China provincial branch system to manage activities such as currency issuance, treasury management, maintaining financial stability and anti-money laundering. Announced at the Two Sessions meeting in Beijing, analysts cited by 21st Century Herald said the reforms would help better coordinate policy with local governments, enhance the monetary transmission mechanism, and support financial services for the real economy. The previous PBOC city and county branch system would be scrapped, according to the paper.

Defusing risks in the real-estate industry should be done in a “slow release” manner, according to Ni Hong, Minister for Housing. Speaking on the side-lines of the Two Sessions meeting in Beijing, Ni said curtailing risk would first involve supporting high quality developers to improve their balance sheets. For other developers, self-help support would be given, however some firms would be made to “pay a due price” for risky behaviour. Ni said he was “very confident” in the stabilisation of the market this year given recent trends in house prices and transactions. (Source: Yicai.com)