MNI China Press Digest Oct 27: RRR Cut, Local Bonds, Recovery

Highlights from Chinese press reports on Friday:

• The People’s Bank of China will likely cut the reserve requirement ratio in Q4 to create a suitable liquidity environment for government bond issuance. Net government bond financing in Q4 will increase by about CNY1.5 trillion compared to the same period last year, after Beijing announced plans to issue an additional CNY1 trillion in treasury bonds this week. Meanwhile, the maturity of a total CNY1.5 trillion of medium-term lending facilities in November and December also increases the possibility of a RRR cut in Q4, said Ming Ming, chief economist at CITIC Securities. (Source: China Securities Journal)
• The issuance of local government bonds reached CNY8.2 trillion as of October 25, breaking through the CNY8 trillion mark for the first time. Annual issuance will likely exceed CNY8.5 trillion as local authorities issue more special refinancing bonds. The borrowers began to issue special refinancing bonds in October, which have reached CNY840 billion as of Wednesday, to swap out high-interest off-balance-sheet debts and repay arrears. The balance of local government statutory debt is close to CNY40 trillion, with the debt ratio exceeding the warning level. The overall local debt risk is controllable but the repayment pressure in some regions is prominent, said an unnamed source close to the regulatory authority. (Source: 21st Century Business Herald)
• China’s economic high frequency data has shown recent improvement with the market expecting a stronger recovery in Q4 following the government's recent announcement of new treasury bonds, according to the 21st Century Herald. The news agency noted passenger car market retail sales increased 19% y/y during Oct 1 to Oct 22, up 8% from the same period last month. The Yiwu Small Commodity Price Index increased 0.7% to 102.1 points, a y/y improvement. Agricultural product prices fell with the wholesale price of pork down 2.7% during the week of Oct 22 to CNY20.97/kg. Domestic Shanghai Containerised Freight Index rose 2.9% w/w to 917.7 points.