MNI China Daily Summary: Wednesday, September 13

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY65 billion via 7-day reverse repos, with the rates unchanged at 1.80%. The operation has led to a net injection of CNY39 billion after offsetting the maturity of CNY26 billion reverse repo 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) decreased to 1.8884% from the close of 1.9513% on Tuesday, Wind Information showed. The overnight repo average fell to 1.5317% from the previous 1.8218%.

YUAN: The currency strengthened to 7.2789 against the dollar from 7.2835 on Tuesday. The PBOC set the dollar-yuan central parity rate lower at 7.1894, compared with 7.1986 set on Tuesday. The fixing was estimated at 7.2808 by Bloomberg survey today.

BONDS: The yield on the 10-year China Government Bond was last at 2.6800%, down from Tuesday's close of 2.6925%, according to Wind Information.

STOCKS: The Shanghai Composite Index lost 0.45% to 3,123.07, while the CSI300 index decreased 0.64% to 3,736.65. The Hang Seng Index edged down 0.09% to 18,009.22.

FROM THE PRESS: The PBOC will likely cut the reserve requirement ratio in Q4 to stabilise interbank liquidity, support credit expansion and lower the cost of banks, said Wen Bin, chief economist at China Minsheng Bank. A total of CNY2.4 trillion of medium-term lending facilities will mature this year, according to Wind Information. It is necessary to roll over the maturing MLFs with greater amounts and cut RRR, said Ming Ming, chief economist at CITIC Securities. (Source: Yicai)

Chinese authorities may allow local governments to issue special bonds early to renovate run-down neighbourhoods in big cities next year as 2023's special bond issuance programme closes, 21st Century Business Herald reported citing anonymous sources familiar with local investment and financing. Some market analysts predict that the annual investment scale of urban-village renovation will exceed over CNY1 trillion, though the source of funds remain uncertain. Some local governments have started to prepare special bond projects for 2024, and urban-village reconstruction is one focus, the newspaper said.

More than 40 local state-owned enterprises in Jiangsu province made announcements to exit from serving as local government financing vehicles so far this year, according to the calculation of National Business Daily. They will no longer finance public-welfare projects and promise to operate independently and be responsible for their own profits and losses. This means these financing platforms have resolved all the implicit debts and will participate in government projects as a market entity in future, said Wu Zhiwu, senior director at CSCI Pengyuan. This will also help expand their financing channels as different types of LGFVs are subjected to various financing limit and debt ratio management, the Daily said.