MNI China Daily Summary: Tuesday, August 26

POLICY: Chinese President Xi Jinping and U.S. President Donald Trump maintain close exchanges and communication, Ministry of Foreign Affairs spokesman Guo Jiakun told reporters.

POLICY: China’s upcoming 15th Five-Year Plan should prioritise the development of new quality productive forces tailored to local conditions, Wang Guosheng, a member of the Standing Committee of the Chinese People's Political Consultative Conference (CPPCC), said during a plenary session, Xinhua News Agency reported.

POLICY: China’s rapid development of AI cannot happen without the supply of reliable green electricity, Du Zhongming, director general of the Department of Electric Power at the National Energy Administration, told reporters.

LIQUIDITY: The PBOC conducted CNY405.8 billion via 7-day reverse repos, with the rate unchanged at 1.40%. The operation led to a net drain of CNY174.5 billion after offsetting maturities of CNY580.3 billion, according to Wind Information

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.4926% from the previous 1.5208%, Wind Information showed. The overnight repo average decreased to 1.3147% from 1.3495%.

YUAN: The currency weakened to 7.1621 against the dollar from the previous 7.1517. The PBOC set the dollar-yuan central parity rate at 7.1188, compared with 7.1161 set on Monday. The fixing was estimated at 7.1682 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 1.7675%, up from 1.7625% at previous close, according to chinamoney.com.cn.

STOCKS: The Shanghai Composite Index was down 0.39% to 3,868.38, while the CSI300 index fell 0.37% to 4,452.59. The Hang Seng Index decreased 1.18% at 25,524.92.

FROM THE PRESS: Interbank liquidity is expected to remain stable through August as the People’s Bank of China maintains an ample stance, Securities Daily reported. The central bank will need to preserve a supportive financial environment amid heavier government bond issuance in August and September, falling bill rates, and weakness in July retail sales and investment, the paper said, citing Wen Bin, chief economist at China Minsheng Bank.

The PBOC’s Shanghai headquarters has adjusted the pricing mechanism for commercial housing loans, removing the distinction between first and second homes, China National Radio reported. The move followed the Shanghai government’s decision on Monday to lift purchase limits on homes outside the outer ring road for local families and for non-local residents with at least one year of social insurance or tax payments in the city, while also raising the loan quota under the personal housing provident fund.

Mergers and acquisitions in China’s A-share market are accelerating, creating space for industrial integration and value reshaping, Securities Daily reported. As of Aug 25, a total of 3,590 M&A deals had been disclosed this year, up 10% y/y, including 107 major asset restructurings, a surge of 114% y/y, the paper said. Payment methods have also become more flexible, with innovative transaction structures such as differentiated pricing and independent performance commitments on the rise, it added.