MNI China Daily Summary: Wednesday, August 27

EXCLUSIVE: Chinese interbank traders see a lower chance of further monetary easing in the rest of 2025 than they did in July as economic growth continues to be solid, and expect more upwards pressure on bond yields as funds are lured into a rising stock market, MNI’s China Money Market Index for August indicated. 

POLICY: China’s port cargo throughput reached 1.54 billion tonnes in July, up 6.9% y/y, 2.2 percentage points faster than June, the Ministry of Transport said.

POLICY: China will introduce measures to expand service consumption in September, Vice Minister of Commerce Sheng Qiuping told reporters.

LIQUIDITY: The PBOC conducted CNY379.9 billion via 7-day reverse repos, with the rate unchanged at 1.40%. The operation led to a net drain of CNY236.1 billion after offsetting maturities of CNY616 billion, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) rose to 1.5123% from 1.4926%, Wind Information showed. The overnight repo average decreased to 1.3145% from 1.3147%.

YUAN: The currency weakened to 7.1622 to the dollar from the previous 7.1621. The PBOC set the dollar-yuan central parity rate lower at 7.1108, compared with 7.1188 on Tuesday. The fixing was estimated at 7.1546 by Bloomberg survey.

BONDS: The yield on 10-year China Government Bonds was last at 1.7650%, up from the previous close of 1.7610%, according to Wind Information.

STOCKS: The Shanghai Composite Index edged down 1.76% to 3,800.35, while the CSI300 index fell 1.49% to 4,386.13. The Hang Seng Index lost 1.27% at 25,201.76.

FROM THE PRESS: The yuan will likely remain relatively strong against the U.S. dollar in the near term, after the onshore rate reached an intraday high of 7.148 on Monday, the highest since July 25, said Wang Qing, an analyst at Golden Credit Rating. In the longer term, the currency is likely to stay broadly stable, with limited risk of significant adjustments, Wang noted, citing China’s ample countercyclical policy tools to buffer potential export headwinds. The dollar index will face downward pressure amid Fed rate cut expectations and as tariff impacts emerge. However, Wang added, the greenback may demonstrate resilience against further declines in the later period, given its sharp H1 losses. (Source: Securities Daily)

Actively managed foreign capital flowed into China for the first time since October 2024, driven by the A-share rally, the Securities Times reported. During Aug 14-20, net inflows of active and passive foreign investment were CNY140 million and CNY6.84 billion, respectively, the newspaper said, citing EPFR data. Foreign capital increased its holdings of domestic stocks and funds by a net of USD18.8 billion in May and June, reversing the overall net reduction trend of the past two years, the newspaper said, citing State Administration of Foreign Exchange data.

China’s net supply of local government bonds is expected to decline in the fourth quarter, prompting some analysts to call for additional support measures, including further issuance of ultra-long-term special treasuries and the introduction of new policy-based financial instruments, the China Securities Journal reported. As of Aug 26, 76.6% of this year’s CNY1.3 trillion quota for ultra-long-term special treasuries had been issued, alongside CNY3.15 trillion of the CNY4.4 trillion in local government special bonds. Issuance has surpassed that recorded during the same period last year, the report said.