MNI China Daily Summary: Wednesday, September 4

MNI (BEIJING) - EXCLUSIVE: There are calls for the People’s Bank of China to expand the CNY300 billion relending facility and lower its interest rate to about 1%, well below current rental yields, to accelerate de-stocking and revive the housing market, advisors and analysts told MNI, noting this would be more effective than plans to allow local governments to use special-bond proceeds to buy unsold housing. 

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY0.7 billion via 7-day reverse repos, with the rate unchanged at 1.70%. The operation led to a net drain of CNY276.6 billion after offsetting maturities of CNY277.3 billion, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) increased to 1.7095% from 1.7021%, Wind Information showed. The overnight repo average decreased to 1.5437% from 1.5739%.

YUAN: The currency strengthened to 7.1135 to the dollar from 7.1171 on Tuesday. The PBOC set the dollar-yuan central parity rate higher at 7.1148, compared with 7.1112 set on Tuesday. The fixing was estimated at 7.1138 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 2.1300%, down from Tuesday's close of 2.1475, according to Wind Information.

STOCKS: The Shanghai Composite Index decreased 0.67% to 2,784.28, while the CSI300 index fell 0.65% to 3,252.16. The Hang Seng Index declined 1.10% at 17,457.34.

FROM THE PRESS: The People’s Bank of China will likely cut the reserve requirement ratio in Q3 to support the accelerated issuance of government bonds since August and help ease increased liquidity pressure in mid-September as the medium-term lending facility operation has been delayed to around the 25th of each month from the 15th, China Securities Journal reported citing Li Chao, chief economist at Zheshang Securities. The expected Fed rate cut would open room for the PBOC to ease, as there is an urgent need to increase countercyclical adjustments in real estate, the newspaper said citing Yi Huan, chief macroeconomist at Huatai Securities.

Shanghai's city government will arrange more than CNY4 billion in funds from its fiscal budget and ultra-long-term special treasury bonds for the trade-in of automobiles and green home appliances to revive the consumer market, Yicai.com reported. With the scale of consumer subsidies hitting a record high, Shanghai increased subsidies of electric and fuel vehicle trade-ins to CNY15,000 and CNY12,000 for each consumer, said Yicai.

Canada’s decision to implement tariffs against Chinese exports will not meaningfully impact the nation's export performance due to the small volumes involved, according to Liang Ming, director at the Ministry of Commerce Research Institute. However, Canada’s actions could damage China by influencing other countries to follow suit, which would adversely impact global trade, Liang noted. China can legally take countermeasures against Canada given they have clearly adopted discriminatory prohibitions, he said.