MNI China Daily Summary: Friday, Aug 1
EXCLUSIVE: China will continue insisting that the U.S. drops tariffs to its baseline 10% in what are likely to be extended negotiations beyond the current Aug 12 deadline, policy advisors told MNI, adding that while this will be a tough sell a potential meeting between the two countries’ leaders later this year might set the scene for a deal including Chinese purchases of American goods.
EXCLUSIVE: Significant investment in China’s energy infrastructure over the past two years has helped reduce chances of widespread industrial disruptions this summer despite record-breaking temperatures, an energy policy expert told MNI, adding that the overall impact on manufacturing and economic activity is likely to remain limited.
POLICY: China's S&P manufacturing PMI, previously known as the Caixin manufacturing PMI, came in at 49.5 in July, up from June's 50.4, falling back into the contraction zone below the 50 mark, as factory output scaled back amid a slower increase in new orders, the company said.
POLICY: Authorities will optimise demand-side power management during the critical period of summer electricity demand, Jiang Yi, director of the Policy Research Office and Spokesperson of the National Development and Reform Commission, told reporters, noting this year's usage was close to or slightly higher than normal.
LIQUIDITY: The People's Bank of China (PBOC) conducted CNY126 billion via 7-day reverse repos, with the rate unchanged at 1.40%. The operation led to a net drain of CNY663.3 billion after offsetting maturities of CNY789.3 billion today, according to Wind Information
RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.4242% on Friday, from 1.5542% previously, Wind Information showed. The overnight repo average decreased to 1.3139% from the previous 1.3957%.
YUAN: The currency weakened to 7.2106 against the dollar, from 7.1930 at Thursday's close. The PBOC set the dollar-yuan central parity rate higher at 7.1496, compared with 7.1494 set on Thursday. The fixing was estimated at 7.2054 by Bloomberg survey today.
BONDS: The yield on 10-year China Government Bonds was last at 1.7050%, down from Thursday's close of 1.7325%, according to Wind Information.
STOCKS: The Shanghai Composite Index declined 0.37% to 3,559.95, while the CSI300 index fell 0.51% to 4,054.93. The Hang Seng Index decreased 1.07% to 24,507.81.
FROM THE PRESS: China’s July PMI showed the economy continues to face downward pressure, according to Zhang Liqun, analyst at the China Federation of Logistics and Purchasing, after the index reached 49.3%, down 0.4 percentage points from the previous month and below the boom and bust line for four consecutive months. Zhang noted the contraction in demand had continued, with various order-related indices down to different degrees. “If demand cannot rebound, authorities must increase macroeconomic counter-cyclical adjustments as soon as possible to enhance the recovery momentum of China's economy,” Zhang added.
Capital market analysts expect additional policy support and incremental funds after the Politburo called for measures to ensure the capital market's stability and consolidate recent upward momentum, Economic Information Daily reported, citing analysts. The meeting called on authorities to make the domestic capital market more attractive and inclusive, marking the first use of such language from high level leaders. Looking ahead, the government needs to deepen reforms, further relax QFII/RQFII quotas to attract more international capital, diversify products and improve supervision, the newspaper said, citing analysts.
The National Development and Reform Commission will intensify efforts to stabilise investment and promote consumption in the second half, with pledges to enhance the "full-cycle" management of government investment projects and stimulate the vitality of private investment, Securities Times reported, citing a recent announcement from the central planner. The NDRC also emphasised the need to deepen bidding system reform and standardise local investment behaviour to deepen the construction of a unified national market, the newspaper said.
