MNI China Daily Summary: Tuesday, July 4

EXCLUSIVE: Chinese regulators are expected to expand the Hong Kong Connect programme to facilitate foreign-capital flows into the mainland’s markets, a prominent policy advisor told MNI. “Chinese financial regulators prefer to have a larger-scale and wider-ranging opening of the financial market, which probably means higher quota and more channels than the current Connect programme,” said Zhang Xiaoyan, chair professor of finance and associate dean at PBC School of Finance at Tsinghua University.

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY2 billion via 7-day reverse repos, with the rates at 1.90%. The operation has led to a net drain of CNY217 billion after offsetting the maturity of CNY219 billion reverse repo today, according to Wind Information. The operation aims to keep banking system liquidity reasonable and ample, the PBOC said on its website.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) decreased to 1.7323% from 1.7505%, Wind Information showed. The overnight repo average rose to 1.1801% from 1.0381%.

YUAN: The currency strengthened to 7.2161 against the dollar from 7.2466 on Monday. The PBOC set the dollar-yuan central parity rate lower at 7.2046, compared with 7.2157 set on Monday.

BONDS: The yield on 10-year China Government Bonds was last at 2.7075%, down from Monday's close of 2.7102%, according to Wind Information.

STOCKS: The Shanghai Composite Index edged up 0.04% to 3,245.35, while the CSI300 rose 0.16% to 3,899.01. The Hang Seng Index was up 0.57% to 19,415.68.

FROM THE PRESS: The National Development and Reform Commission said it will listen to private entrepreneurs, propose effective policy measures to help them solve practical problems and create a good development environment for their businesses. The NDRC has recently established a communication mechanism with the private sector and Zheng Shanjie, head at the NDRC, presided over a symposium for private entrepreneurs on Monday. (Source: NDRC website)



China will introduce export controls on gallium and germanium, two key raw materials used to make semiconductors, according to the Ministry of Commerce. To safeguard national security, exporters will need to obtain a MOFCOM license before exportation. The State Council will make the final decision on cases where MOFCOM believes national security could be impacted. Policymakers will begin implementing the law from August 1, with exporters facing punishment if they fail to follow the correct procedure. According to the Securities Times, China produced 290 tons of gallium and germanium, with global production at 300 tons. (Source: Securities Times)

China will likely further relax housing policies in first- and second-tier cities as the property market bottomed at end-Q2 after a brief rebound in Q1, said Chen Wenjing, head of market research at China Index Academy. Room for optimising the scope of home-purchase restrictions exists, as well as a reduction in transaction taxes and fees. Weakened income expectations, a strong outlook for lower home prices, and concern on unfinished off-plan housing impedes the recovery. Market outlook in H2 depends on the restoration of confidence and the intensity of policy support, according to the 21st Century Business Herald. (Source: 21st Century Business Herald)