MNI China Daily Summary: Wednesday, September 18

EXCLUSIVE: China needs to clarify rules that protect foreign investors and further open up its service sector if it is to reverse a near one-third drop in foreign direct investment so far this year, advisors and analysts told MNI, though some noted the country also faces long-term structural challenges.

POLICY: Beijing house buyers bought 6.5 million square meters of newly built commercial housing between January and August, down 5.1% y/y, and declining further from the 4.1% drop seen during the first seven months of the year, data from the capital’s statistics department showed.

POLICY: Beijing municipality consumption increased 3.3% y/y between January and August, unchanged from the first seven months of the year, the capital’s data department said.

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY568.2 billion via 7-day reverse repos, with the rate unchanged at 1.70%. The operation led to a net injection of CNY80.7 billion after offsetting CNY487.5 billion maturities, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) rose to 1.8840% from 1.6542%, Wind Information showed. The overnight repo average increased to 1.7769% from 1.6051%.

YUAN: The currency strengthened to 7.0893 to the dollar from the previous 7.0943. The PBOC set the dollar-yuan central parity rate lower at 7.0870, compared with 7.1030 set before mid-autumn holiday. The fixing was estimated at 7.0966 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 2.0375%, down from the previous close of 2.0556, according to Wind Information.

STOCKS: The Shanghai Composite Index increased 0.49% to 2,717.28, while the CSI300 index gained 0.37% to 3,171.01. The Hang Seng Index rose 1.37% at 17,660.02.

FROM THE PRESS: The PBOC is expected to cut the reserve requirement ratio within the year, given the continuous contraction in manufacturing PMI, prices and real-estate sector, China Securities Journal reported, citing analysts. Wang Qing, analyst at Golden Credit Rating, expects a 50 basis point cut in Q4, releasing CNY1 trillion to mainly support government-bond issuance. Li Yishuang, chief fixed income analyst at Cinda Securities, expects a Q4 RRR cut given the large amount of medium-term lending facilities maturing, while February’s reduction can still cover the long-term liquidity requirements such as financial institutions’ reserve holdings, given the sharp decline in deposit growth this year.

Chief economists expect authorities to make stronger efforts in Q4 to meet the annual growth target of about 5%, following recent top leadership remarks urging officials to strive and complete annual economic tasks, Securities Daily has reported. After August’s data showed incremental policies are needed to break the current state, according to Guo Lei, chief economist at GF Securities. Wen Bin, chief economist at Minsheng Bank, said the issuance of government bonds accelerated significantly in August, but government expenditure this year remained slow.

China’s Ministry of Transport recorded the cross-regional flow of 215.9 million people during the first day of the Mid-Autumn Festival, up 10.6% m/m, and 37.9% and 13.3% over the same period in 2023 and 2019, 21st Century Business Herald reported. Railway passenger volume reached 17.0 million, up 30.3% m/m, increasing 67.8% and 28.7% from 2023 and 2019. Civil aviation passenger volume was 1.8 million, down 13.4% from the previous month and dropping 2.0% from the same period in 2023, but rising 16.9% from 2019. Highway travellers reached 196.5 million, up 9.5% m/m and 36.5% y/y.