MNI China Press Digest July 4:Financial Bond, LPR, Bond Market

The following lists highlights from Chinese press reports on Monday:

• China’s policy-based and developmental financial bonds with a combined scale of CNY300 billion announced by the State Council last week, will be used to boost infrastructure such as transportation and water conservancy, innovation and other regional projects, an official from the People’s Bank of China told the PBOC-run newspaper Financial News. The PBOC will take the lead in supporting the China Development Bank and the Agricultural Development Bank of China to raise the funds and the central government will give an appropriate interest discount for two years, the official said. Such instruments are conducive to guide financial institutions to issue medium and long-term low-cost loans to support project construction without resorting to excessive money supply, the official said.
• The People’s Bank of China may further guide down the Loan Prime Rate, mainly the five-year one, in the second half of the year to help boost housing mortgages and stabilise market expectations, the Securities Daily reported citing analysts. The PBOC will also use structural monetary policy tools, such as issuing additional re-lending tools for industries affected by the pandemic, the newspaper said citing Ming Ming, chief economist of CITIC Securities. The PBOC may also increase loan support for private enterprises faced with the dilemma of closing down or reducing production which in turn causes supply chain interruptions, the newspaper said citing Ming.
• China will further open up its bond market to international investors while improving macro-prudential management, strengthening supervision of cross-border capital flows, and conducting real-time monitoring of the market, Pan Gongsheng, deputy governor of the People’s Bank of China wrote in an article published in the official China Finance magazine. It will also build a systemic risk monitoring, assessment and early warning mechanism to ensure financial security, said Pan. By the end of May, foreign investors held CNY3.74 trillion of Chinese bonds, up CNY2.81 trillion from five years ago before the launch of the Bond Connect Scheme with Hong Kong, according to the article.