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POLICY: China aims to complete this year's issuance of CNY3.75 trillion in special-purpose government bonds by Oct. 31 and has specific rules on the use of the funds, said Finance Minister Liu Kun. The money raised by bonds must be invested in profitable public projects and cannot be invested in commercial projects and subsidizing companies, Liu said in an interview with the People's Daily published on Friday.

REALITY CHECK: China's consumer prices may edge higher in July as the cost of diet staples pork and vegetables again rose above trend as demand continued to pick up and poor weather in Southern China disrupted supply, industry insiders told MNI.

LIQUIDITY: The People's Bank of China (PBOC) injected CNY10 billion via 7-day reverse repos with the rate unchanged on Friday. This resulted in a net drain of CNY10 billion due to the maturity of CNY20 billion reverse repos 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 2.2018% from Thursday's close of 2.0179%, Wind Information showed. The overnight repo average jumped to 2.0568% from 1.6637% on Thursday.

YUAN: The currency weakened to 6.9598 against the dollar from Thursday's close of 6.9441. The PBOC set the dollar-yuan central parity rate lower at 6.9408, compared with Thursday's 6.9438.

BONDS: The yield on 10-year China Government Bonds was last at 2.9900%, up from Thursday's close of 2.9875%, according to Wind Information.

STOCKS: The Shanghai Composite Index lost 0.96% to 3,354.04. The CSI300 index decreased 1.15% to 4707.93. The Hong Kong's Hang Seng Index down 1.6% to 24531.62. The market is panic at the announced U.S. ban on Chinese messaging app Wechat and its owner, Tencent, saw the shares down 5% in Hong Kong today.

FROM THE PRESS: New bank loans in China may rise to about CNY1.2 trillion, up CNY150 billion from last July and maintaining the pace of increase from June, China Securities Journal reported. Citing Sun Binbin, the chief fixed-income analyst with TF Securities, the Journal's report said this year's strong infrastructure spending continued to support the rise in new loans even during the normally slow summer period. Total social financing for July may increase by 13%, bolstered by the issuance of special central government bonds, Hua Changchun, the chief global economist with Guotai Junan Securities, told the Journal.

The planned visit to Taiwan by U.S. Secretary of Health and Human Services Alex Azar is "provocative" in a period of sensitive Sino-U.S. relations and the "complex and severe" cross-strait situation, the People's Daily said in a commentary. The visit serves as an attempt by the U.S. to cover up its inefficiency in containing the COVID-19 outbreak and its stalling economy, the Daily said. China urges the U.S. to sever all official ties with Taiwan to prevent a further deterioration in relations, the official newspaper said. Members of Taiwan's Democratic Progressive Party are nave to think that Taiwanese policies and visiting trips by the U.S. would consolidate relationships between the two, the Daily's commentary said.

China's Defense Minister Wei Fenghe has asked the U.S. to stop "wrong words and actions", strengthen maritime risk management and avoid dangerous measures which could escalate tensions, according to a statement issued by the Xinhua News Agency. The Xinhua report follows a phone call between Wei and his U.S. counterpart Defense Secretary Mark Esper in which Wei stated China's stance on issues including the South China Sea and Taiwan. According to Xinhua, Esper said that when the relations between the two countries are tense, the two militaries should maintain dialogue and consultation, control the crisis, prevent misjudgment and reduce risks.

MNI London Bureau | +44 203-865-3812 |
MNI London Bureau | +44 203-865-3812 |

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