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POLICY: China will promote the launch of major projects under its latest Five-Year Plan through 2025 to stabilize economic growth, said Meng Wei, spokeswoman of the National Development and Reform Commission at a briefing on Tuesday. The NDRC will urge local governments to get special bond-funded projects well prepared for bond sales in H2 this year as well as H1 next year, so to ensure substantial work, said Meng.
LIQUIDITY: The People's Bank of China (PBOC) injected CNY10 billion via 7-day reverse repos with the rate unchanged at 2.2%. The operation left liquidity unchanged given it netted off CNY10 billion reverse repos maturing today, according to Wind Information. The operation aims to keep 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 2.1078% from the close of 2.1736% on Monday, Wind Information showed. The overnight repo average fell to 1.9580% from the previous 2.0426%.
YUAN: The currency weakened to 6.4799 against the dollar from Monday's close of 6.4756. The PBOC set the dollar-yuan central parity rate higher at 6.4765, compared with the 6.4717 set on Monday.
BONDS: The yield on 10-year China Government Bonds was last at 2.9050%, down from Monday's close of 2.9250%, according to Wind Information.
STOCKS: The Shanghai Composite Index tumbled 2.00% to 3,446.98, while the CSI300 index tumbled 2.10% to 4,837.40. The Hong Kong's Hang Seng Index lost 1.66% to 25,745.87.
FROM THE PRESS: The PBOC is likely to keep the benchmark LPR unchanged this month, but lenders may be more incentivised to quote lower rates as their cost of capital declines, the Securities Times said citing Wang Qing of Golden Credit Ratings, after the central bank kept the MLF rate at 2.95% on Monday. The central bank exceeded market expectations yesterday when it renewed CNY600 billion of the CNY700 billion maturing MLF. The backwardation between market rates and the 2.95% MLF rate rose to 30 bps on Aug. 13, limiting banks' demand for the MLF operation, the newspaper said. Lenders stood to save CNY13 billion in capital costs when the PBOC cut RRRs in July and helped them reduce costs of deposit in June, the newspaper said.
China's State Council on Monday urged officials to use funds including those unlocked through the July RRR cut to increase financial support to small businesses and invest in labour-intensive industries to boost employment. The authorities must increase cross-cycle measures to ensure reasonable growth amid new outbreaks, volatile commodities and natural disasters, Premier Li Keqiang's government said following an executive meeting. Officials also must ensure market supply and stabilize prices of raw materials including selling reserves, and investments and consumption should be boosted through selling special-purpose local government bonds, the government said.
China should make good use of the current window to improve its economic structure while accepting a lower growth, the 21st Century Business Herald said in an editorial. The main challenge is to boost consumption, which needs better social distribution, the newspaper said, noting the finance, real estate sectors and some Internet platforms have benefited the most in the market and suppressed the real economy as well as pushed up residents' leverage and affect spending. The traditional countercyclical adjustment of boosting infrastructure and real estate investment is inefficient as such investment could not create long-term value compared with its huge input cost, but pressured the country's close-to-limit debt tolerance, the newspaper said.