MNI China Daily Summary: Monday, September 29

POLICY: China will unveil its 15th Five-Year Plan at the Fourth Plenary Session of the 20th Central Committee of the Communist Party of China, scheduled for Oct. 20-23, Xinhua News Agency reported following the latest Politburo meeting.

POLICY: China will provide an additional CNY500 billion to support investment as the economy faces challenges, National Development and Reform Commission spokesperson Li Chao told a briefing.

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY288.6 billion via 7-day reverse repos, with the rate unchanged at 1.40%. The operation led to a net injection of CNY48.1 billion after offsetting maturities of CNY240.5 billion today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) rose to 1.5868% from 1.5556%, Wind Information showed. The overnight repo average decreased to 1.3107% from 1.3126%.

YUAN: The currency strengthened to 7.1204 against the dollar from 7.1345 on Friday. The PBOC set the dollar-yuan central parity rate lower at 7.1089, compared with 7.1152 set on Friday. The fixing was estimated at 7.1265 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 1.8775%, down from the previous close of 1.8800%, according to chinamoney.com.cn.

STOCKS: The Shanghai Composite Index edged up 0.90% to 3,862.53 while the CSI300 index increased 1.54% to 4,620.05. The Hang Seng Index rose 1.89% to 26,622.88.

FROM THE PRESS: The PBOC may continue prioritising “implementing existing policies” for now, as signaled by its Monetary Policy Committee at the Q3 meeting, 21st Century Business Herald reported. Compared with Q2, the Committee added a call to “ensure thorough implementation of various monetary policy measures to fully unleash policy effects,” while dropping reference to “stepping up efforts to implement additional policies,” though still stressing policy flexibility, the newspaper said.

Authorities should boost the supply of short-term treasuries as their scarcity is hampering the PBOC’s open market operations, wrote Guan Tao, global chief economist at BOCI China. While the PBOC has positioned treasury bond trading as a tool for base money injections and liquidity management, activity was suspended in January amid a persistent supply-demand imbalance. China’s treasury issuance is largely aimed at deficit financing, dominated by medium- and long-term notes, compared with around 50% short-term issuance in developed economies, Guan noted. He added that treasuries accounted for just 4.9% of the PBOC’s total assets as of August.

Profits at industrial enterprises increased 20.4% y/y in August, reversing a decline of 1.5% in July, driven by efforts to combat aggressive price competition, coupled with a low base from the same period last year, Yicai.com reported citing data by National Bureau of Statistics on Saturday. For the first eight months, industrial profits grew by 0.9% y/y, reversing the continuous decline since May. Profits are expected to keep recovering moderately, with the support of anticipated additional pro-growth policies, and improving market order and more reasonable price transmission and cost distribution mechanisms, the newspaper said citing Wen Bin, chief economist of China Minsheng Bank.