MNI China Daily Summary: Friday, August 22

EXCLUSIVE: The People’s Bank of China (PBOC) is likely to make a small policy-rate cut and reduce the reserve requirement ratio (RRR) this year in Q4 to boost prices and support fiscal expansion, with expected U.S. Federal Reserve easing giving it room to act, policy advisors and economists told MNI, noting the bullish A-share market will also help support domestic demand.

POLICY: China’s electric vehicle charge points reached 16.6 million by the end of July, up 53% y/y and an 0.5 million rise m/m, data from the National Energy Administration showed.

LIQUIDITY: The PBOC conducted CNY361.2 billion via 7-day reverse repos, with the rate unchanged at 1.40%. The operation led to a net injection of CNY123.2 billion after offsetting maturities of CNY238 billion, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.4669% from 1.5140%, Wind Information showed. The overnight repo average decreased to 1.4122% from 1.4639%. 

YUAN: The currency weakened to 7.1805 against the dollar from the previous 7.1778. The PBOC set the dollar-yuan central parity rate higher at 7.1321, compared with 7.1287  on Thursday. The fixing was estimated at 7.1874 by Bloomberg survey.

BONDS: The yield on 10-year China Government Bonds was last at 1.7675%, up from the previous close of 1.7635%, according to Wind Information.

STOCKS: The Shanghai Composite Index rallied 1.45% to 3,825.76, while the CSI300 index gained 2.10% to 4,378.00. The Hang Seng Index rose 0.93% to 25,339.14.

FROM THE PRESS: China's universities introduced 1,395 new engineering majors and cancelled 823 over the past two years as the country moves to address a shortage of talent in emerging sectors, Yicai reported, citing experts. Currently, more than 80% of university majors stem from the first three industrial revolutions, leading to demand mismatches and inadequate skill development, one expert noted. Li Yanrong, an academic at the Chinese Academy of Engineering, emphasised that most of the nation's engineering courses relate to technical support systems subdivided by industrial categories, a structure that fragments knowledge, dilutes educational resources and undermines knowledge integration.

Improvements to Chinese firms' long-term competitiveness and sustainable profitability amid structural transformation has driven the recent re-rating of companies' stock valuations, alongside the easing of systemic real-estate risks and stronger policy support measures, according to Cheng Yu, a hybrid fund manager at Allianz China. Cheng emphasised the re-ratings were not predicated on macroeconomic growth, current earnings, or monetary easing, but rather on the country's long-term competitive positioning. (Source: Yicai)

Authorities have issued CNY3.05 trillion in new special bonds as of Aug 21, a 47.1% increase y/y and leaving around CNY1.35 trillion still available. The Securities Daily said authorities are expected to concentrate remaining issuance in September. Feng Lin, executive director at Orient Jincheng, a securities firm, noted that infrastructure development and land reserve acquisitions remain the primary destinations for the funds. In the first seven months of the year, 38.5% of proceeds were allocated to key infrastructure sectors, municipal and industrial park development, transportation networks and agriculture, forestry, and water resources, the daily noted.