MNI China Daily Summary: Thursday, August 7

DATA: Exports in July reached USD321.8 billion, up 7.2% y/y, the fastest growth in three months, exceeding last 5.8% and the forecasted 5.5%. Imports rose 4.1% in July, the second positive change in five months and beating the market consensus of a 1.5% drop, data released by China Customs showed. 

DATA: China's foreign exchange reserves fell by USD25.2 billion in July, weighed by a rising U.S. dollar index and global financial asset price fluctuations, data by the State Administration of Foreign Exchange showed. The country's forex reserves, the world's largest, declined by 0.76% to USD3.292 trillion last month, slightly higher than market expectation of USD3.281 trillion.

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY160.7 billion via 7-day reverse repos, with the rate unchanged at 1.40%. The operation led to a net drain of CNY122.5 billion after offsetting maturities of CNY283.2 billion today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.4516% from 1.4557% previously, Wind Information showed. The overnight repo average was at 1.3153%, flat from the previous close. 

YUAN: The currency strengthened to 7.1777 against the dollar from the previous 7.1900. The PBOC set the dollar-yuan central parity rate lower at 7.1345, compared with 7.1409 set on Wednesday. The fixing was estimated at 7.1725 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 1.6950%, down from the previous close of 1.6980%, according to Wind Information.

STOCKS: The Shanghai Composite Index edged up 0.16% to 3,639.67, while the CSI300 index increased 0.03% to 4,114.67. The Hang Seng Index lost 0.69% to 25,081.63.

FROM THE PRESS: China’s Chief Economist Confidence Index rose to 50.2 in August, surpassing the 50-point boom-bust threshold after recording 49.9 in July, Yicai News Agency reported. Guan Tao, chief economist at Bank of China International Securities, stated that achieving the annual economic growth target of around 5% this year is well within reach. However, due to ongoing external uncertainties, macroeconomic policy will remain supportive to sustain the economy’s upward momentum. Guan, who was also a former senior official at the State Administration of Foreign Exchange, noted that fiscal policy will focus on leveraging existing policy space, accelerating expenditure and promoting government investment. Monetary policy will concentrate on enhancing the transmission mechanism, deepening financial supply-side structural reforms and consolidating the outcomes of earlier policy measures, Guan added.

China’s national local general public budget revenue rose 1.6% year-on-year in the first half, while tax revenue declined in many provinces, reflecting persistent pressure on fiscal revenue growth, Yicai News Agency reported. Wang Zhenyu, director of the Local Finance Research Institute at Liaoning University, stated that the data points to a weak recovery in local government finances during the first half and the foundation remains fragile. He noted that while local fiscal revenue is expected to continue growing in the second half, potential fluctuations in the third quarter warrant close monitoring and timely policy reinforcement.

China’s manufacturers should increase their globalised layout to better balance labour, tariffs and shipping costs, and align closely with host countries' market demands, according to senior researchers at the Chinese Academy of Macroeconomic Research, in an article published by The People’s Daily. Manufacturing globalisation provides strategic opportunities to break through traditional market boundaries and innovation bottlenecks, the researchers said. To expand overseas, firms must leverage local industrial development models, strengthen cooperation with local companies and fulfil social responsibilities.