JGBS: Twist-Steepener Holding At Lunch

China should decrease holdings of U.S. treasury bills and import more high-tech capital goods and strategic materials, according to Yu Yongding, an academic member at the Chinese Academy of Social Sciences. Economists and policy advisers interviewed by China Daily said authorities should reduce U.S. government debt to safeguard national financial stability, amid waning confidence in the dollar-based system and persistent geopolitical tensions. Guan Tao, a former senior official at the State Administration for Foreign Exchange, said the long-term sustainability of U.S. debt was a concern.

The banking sector kept the Loan Prime Rate (LPR) unchanged in July, at 3.0% for one-year loans and 3.5% for five-year loans, influenced by the continued decline in net interest margins (NIM) across the banking sector, according to Dong Ximiao, chief researcher at China Construction Bank. Dong noted that by the end of Q1 2025, the average NIM at commercial banks had narrowed to 1.43%, down 9 basis points from the previous quarter. While some market analysts suggested that monetary authorities could lower the reserve requirement ratio or policy rates in the second half of the year, Dong emphasized the need to focus on reducing broader social financing costs. This includes lowering non-interest expenses such as mortgage guarantee fees and intermediary service charges, which weigh on borrowers and the overall cost of credit, Dong said. (Source: Yicai)

China-U.S. east coast route shipping costs have fallen to USD3,300-3,800 per 40-foot standard container, from USD7,000 at the start of June, with the west coast line reaching USD1,700-1,800 per container, down from USD6,000, 21st Century Business Herald has reported. In response to weakening demand and falling freight prices, shipping companies are actively cutting capacity to stabilise the market. While the third quarter traditionally marks peak season for trans-Pacific trade, driven by inventory build-up ahead of Halloween, Black Friday, and Christmas, an industry insider said demand has been unseasonably weak this year, largely due to front-loaded shipping activity in the first half.