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EXCLUSIVE: Sovereign bond sales and currency futures should be the next steps for the Pudong New Area in Shanghai to bolster trade in the offshore yuan by drawing on a pool of existing international and domestic market players, policy advisors told MNI. A good start would be the Ministry of Finance issuing Chinese government bonds (CGBs) in Shanghai to deepen traded volume and scale, said Ding Jianping, a member of the academic committee at the International Monetary Institute and vice president of Shanghai Institute of International Finance Center.

LIQUIDITY: The People's Bank of China (PBOC) injected CNY10 billion via 7-day reverse repos with the rate unchanged at 2.2% on Tuesday. 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) increased to 2.2205% from the close of 2.1472% on Monday, Wind Information showed. The overnight repo average rose to 2.2682% from the previous 2.1655%.

YUAN: The currency strengthened to 6.4778 against the dollar from Monday's close of 6.4902. The PBOC set the dollar-yuan central parity rate lower at 6.4805, compared with the 6.4969 set on Monday.

BONDS: The yield on 10-year China Government Bonds was last at 2.8500%, down from Monday's close of 2.8650%, according to Wind Information.

STOCKS: The Shanghai Composite Index rose 1.07% to 3,514.47, while the CSI300 index increased 1.09% to 4,888.39. The Hong Kong's Hang Seng Index rallied 2.46% to 25,727.92.

FROM THE PRESS: The PBOC is likely to withhold major monetary and credit easing measures until next year, judging by the statement from a Monday meeting chaired by Governor Yi Gang, which emphasized "coordinating macro policies this year and next year", the 21st Century Business Herald said. The PBOC is seen unlikely to continue with another RRR cut in Q3, but possibly in Q4 if economic slowdown accelerates and debt defaults surge, the newspaper said citing Zhang Jiqiang, deputy research head of Huatai Securities. New loans may hit a new high in Q1, 2022, as more investment projects to stabilize the growth start, which require loans to back up, the newspaper said.

The Chinese yuan will remain resilient supported by continued trade surplus in H2 and the higher-than-usual surplus in FX settlement and sales, which help overcome depreciation pressure from investors seeking refuge in the U.S. dollar, the Shanghai Securities News reported citing analysts. The yuan has performed stronger against other currencies under pressure from the U.S. Federal Reserve's possible slowing debt purchases, with the CFETS RMB Index up 0.32 from a week earlier, the highest since March 2016, the newspaper said.

China's private companies are eager to invest in Afghanistan's economic reconstruction as the government's "successful diplomacy with the Taliban" laid the foundation for the safe operation of Chinese businesses there, the Global Times reported citing Chinese businesspeople in Afghanistan. However, Chinese state-owned companies are taking caution to be in line with the Chinese national strategy given Western governments' potential sanctions on the Taliban, the newspaper said. China can help Afghanistan generate self-dependent economic drive, even include the country, which sits along the Belt and Road Initiative route, into the China-Pakistan Economic Corridor, the newspaper said citing Liu Zongyi, the secretary-general of the Research Center for China-South Asia Cooperation at the Shanghai Institutes for International Studies.

MNI London Bureau | +44 203-586-2225 | les.commons@marketnews.com
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