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Economists Survey Raises 2021 CPI Forecast To 4.9%

POLICY: The People's Bank of China will maintain its prudent monetary policy while boosting its independence in the face of possible monetary tightening globally, Deputy Governor Pan Gongsheng briefed Tuesday, emphasizing that China still has relatively large policy space.

DATA: China's exports in August surged 25.6% y/y to USD294.32 billion, overwhelming the 17.3% y/y consensus and last 19.3% y/y growth, showing a very resilient rebound on the back of the quickly increased Delta variants which had forced factory shutdowns in part of Asia, data from China General Administration of Customs showed. Imports jumped 33.1% y/y growth to USD235.98 billion, partly due to the fast-rising raw material prices including iron and ore, crude oil and coal, according to Customs release.

LIQUIDITY: The PBOC injected CNY10 billion via 7-day reverse repos with the rate unchanged at 2.2%. The operation resulted in a net drain of CNY40 billion given the maturity of CNY50 billion reverse repos, 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 2.1942% from the close of 2.1385% on Monday, Wind Information showed. The overnight repo average rose to 2.1846% from the previous 2.1140%.

YUAN: The currency weakened to 6.4604 against the dollar from Monday's close of 6.4538. The PBOC set the dollar-yuan central parity rate slightly higher at 6.4533, compared with the 6.4529 set on Monday.

BONDS: The yield on 10-year China Government Bonds was last at 2.8550%, up from Monday's close of 2.8325%, according to Wind Information.

STOCKS: The Shanghai Composite Index rallied 1.51% to 3,676.59, while the CSI300 index increased 1.20% to 4,992.83. The Hong Kong's Hang Seng Index gained 0.73% to 26,353.63.

FROM THE PRESS: The China Securities Regulatory Commission will further open up the capital markets to overseas investors, including expanding and improving the Shanghai-London Stock Connect, introducing more international varieties of commodity and financial futures products and recognition of professional qualifications, the China Securities Journal said citing the commission's chairman Yi Huiman. China will further develop the merger of Shanghai, Shenzhen and Hong Kong securities trading standards, and provide fairer and more efficient services to overseas investors participating in the Chinese capital markets, Yi was cited as saying.

Most Chinese lenders have reduced the shares of residential mortgages in their loans in the first half, compared with the end of last year, although the Postal Savings Bank and the China Construction Bank still exceeded the 32.5% limit imposed by the banking regulator, the China Securities Journal reported citing the 1H income statements disclosed by the banks. Four of the six largest state-owned banks reported gains in bad debt ratios in their real estate portfolios as some developers failed to reach their target sales, the newspaper said. As the authorities tighten controls over the property sector, the banks are expected to be cautious and choose to lend to those industries favoured by the government, such as new manufacturing, said the journal.

Local governments in China are expected to issue about CNY500 billion of bonds in September, including about CNY450 billion of special-purpose bonds to boost infrastructure investment, the Securities Daily reported citing Luo Zhiheng, deputy dean of Yuekai Securities Research Institute. China has been accelerating its local bond sales in H2, as the issuance in August reached CNY593 billion, rising 47% from the previous month and setting a new monthly high for the year, the newspaper said. Infrastructure investment in China is likely to rebound moderately from the accumulated 4.6% growth in the first seven months.

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