MNI China Press Digest August 15: PBOC, Prices, Stocks

Highlights from Chinese press reports on Friday:

• The People’s Bank of China is likely to sustain ample liquidity via medium-term lending facilities and outright reverse repos during the peak period of government bond issuance, Economic Information Daily reported, citing Wang Qing, analyst at Golden Credit Rating. Such operations will support credit expansion and strengthen countercyclical adjustment, Wang said. The PBOC may delay reserve requirement ratio or interest rate cuts until early Q4, as external volatility and changes in Q3 growth momentum need further observation, he added, while ruling out a near-term resumption of central bank government bond trading.
• China’s recent crackdown on excessive competition will not trigger a broad price rise, as prices remain dependent on a recovery in domestic demand, Economic Daily said in a commentary. The impact is structural and moderate, it said. PPI’s m/m decline narrowed to 0.2% in July from -0.4% in June, the first slowdown in the fall since March, suggesting improved enterprise profits from curbing disorderly price competition and eliminating inefficient capacity. Core CPI’s third straight monthly gain was also partly driven by reduced price wars in the automobile and home appliance sectors under policy guidance, the newspaper said.
• Medium- and long-term A-share market investors, including insurers, are increasing their allocations, while northbound funds have recently seen continuous net inflows, Securities Daily said in a commentary, noting the sustained upward trend is expected to take shape gradually, supported by capital inflows, improved economic fundamentals and policy backing. The margin trading balance has returned to CNY2 trillion for the first time in a decade, with funds steadily increasing positions. Such rallies driven by diverse funding sources tend to be more sustainable, the newspaper said.