China Press Digest Nov 1: Liquidity, LGBs, Capital Inflow

The following lists highlights from Chinese press reports on Tuesday:

• The PBOC will flexibly use the medium-term lending facilities, open market operations and other tools to inject liquidity with different maturities to ensure the CNY2 trillion gaps in November are "smoothened over," the Securities Times said. A total of CNY1 trillion reverse repos are maturing this week, and another CNY1 trillion MLF will come due in the second half of November, the official securities newspaper said, noting that the overall scale of local government bond issuance is close to CNY900 billion in November. Though the PBOC is less likely to cut RRR, it may roll over maturing MLF and increase reverse repos, the newspaper said. Increased fiscal spending by yearend is expected to release CNY1.89 trillion and CNY3.81 trillion to the inter-bank market in November and December, respectively, which can fully cover the impact of goverment bond issuance, the newspaper said.
• China's issuance of local government special bonds to fund infrastructure projects may surge in November to over CNY700 billion, the Economic Information Daily reported citing industry estimates. Funds raised from new local government special bonds have mostly supported new projects since H2, with over 40% invested in transportation and urban amendities, which helps drive investments and stabilize the economy, the daily said. The stimulus impact may register in Q4 or early next year, the newspaper said citing analysts.
• China needs to increase economic and financial supervision and risk-prevention capacities to better manage the expected investments in its bonds, the Economic Daily said in an editorial. The inclusion of China's sovereigns into the FTSE World Government Bond Index concluded China's acceptance by all top three global bond indices, a recognition of its reform measures, said the official newspaper. The WGBI is followed by larger and more influential funds, so more capital is expected to flow into China, it said. China should enhance monetary policy coordination and macroprudential framework, including the supervision of its foreign exchange markets, the daily said.
• Residents in Beijing are told by the authorities not to leave the city unless necessary and those traveling should postpone returning after new Covid-19 cases are reported, the Global Times reported citing the Beijing Health Commission. New cases have been reported by at least 16 provincial areas in China so far, the newspaper said. Some analysts believe that the measures are also timed ensure the safety of the 2022 Winter Olympics, the newspaper added.