MNI China Daily Summary: Tuesday, October 12

EXCLUSIVE: China's central bank will provide ample liquidity to combat an economic slump led by slowing exports and property sales, including a possible cut in the reserve requirement ratio as growth may slip under 5% in Q4 and lower in 2022, policy advisors told MNI. A dovish policy stance will be flagged under a "moderate easing" tone in Q4 via the interbank market and open market operations and other tools such as the RRR, said Lian Ping, chief economist at Zhixin Investment Research Institute, predicting GDP growth of 5% or less in Q4 and further slowing in H1.

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 operations lead to a net drain of CNY90 billion after offsetting the maturity of CNY100 billion reverse repos today, according to Wind Information. The operation aims to keep the 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 2.1592% from the close of 2.1643% on Monday, Wind Information showed. The overnight repo average rose to 2.1063% from the previous 2.0871%.

YUAN: The currency weakened to 6.4565 against the dollar from Monday's close of 6.4377. The PBOC set the dollar-yuan central parity rate lower at 6.4447, compared with the 6.4479 set on Monday.

BONDS: The yield on 10-year China Government Bonds was last at 2.9600%, up from Monday's close of 2.9575%, according to Wind Information.

STOCKS: The Shanghai Composite Index lost 1.25% to 3,546.94, while the CSI300 index tumbled 1.06% to 4,883.84. The Hong Kong's Hang Seng Index fell 1.43% to 24,962.59.

FROM THE PRESS: China must study the timeline and roadmap for the stages of achieving peak carbon goal to incorporate the situations of power and coal supply shortages, Premier Li Keqiang told a cabinet meeting, according to Xinhua News Agency. Local authorities should be realistic and rectify the cookie-cutter way of limiting electricity usage, production or competitive carbon reduction, so as to ensure people's heating needs, stable logistical supply and steady economic growth, Li said according to Xinhua. China must develop more natural, shale and coal gases, and boost coal gas reserves, while steadily retire inefficient coal, Li said.

The PBOC may cut banks' reserve requirement ratios as early as in October to fill the liquidity gap caused by accelerated issuance of local government bonds, the 21st Century Business Herald reported citing analysts. The liquidity shortage is estimated to be around CNY1.4 trillion, as the net financing of government bonds in October will be around CNY860 billion, and October is the tax payment peak with CNY500 billion MLFs maturing, the newspaper said citing Yang Yewei, the chief analyst at Guosheng Securities. October is a suitable time window for an RRR cut to smoothen liquidity, or it could affect the cross-cycle adjustment and the policy convergence going into the next year, the newspaper said citing analysts from Huachuang Securities.

China needs to continue ensuring its energy supply security by optimizing domestic supplies, diversifying overseas sources and protecting the safety of energy transport routes, the Global Times said in a commentary. Only by reducing the dependence on fossil fuels can China break away from the constraints by the U.S. or other external forces when it comes to energy supplies, said the newspaper. China needs to re-examine its green energy development path to address potential risk factors, and it is an inevitable trend for domestic industries to reduce the use of fossil fuels and increase the use of renewable energy products, said the newspaper.