This daily digest focuses on market sentiment, new developments in China’s foreign exchange policy, changes in financial market regulations and Chinese-language economic coverage in order to keep DailyFX readers up-to-date on news typically covered only in Chinese-language sources.
- The PBOC withdrew 100 billion Yuan of liquidity through reverse repos on July 5th.
- China’s Statistics Bureau introduced a revised method for calculating GDP figures.
- The FX regulator said that they have introduced multiple measures in the effort of easing capital outflows.
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Hexun News: Chinese leading online media of financial news.
- The PBOC fixed the onshore Yuan 122 pips lower against the US Dollar to 6.6594 on July 5th, the weakest level since December 2010.
The Central Bank issued 40 billion Yuan of 7-day reverse repos on July 5th. After deducting the 140 billion Yuan of reverse repos maturing on the day, the net liquidity withdrawal was 100 billion Yuan. This week, there will be a total of 840 billion Yuan of reverse repos to mature. As the PBOC’s mid-year Macro Prudential Assessment on commercial banks has been completed and the temporary increase in liquidity demand at the quarter-end has been met, liquidity need may see drops over the following periods and, in-turn, the Central Bank may continue to withdraw cash from the market.
- China’s Monetary Policy Committee hosted the second quarter meeting on July 4th: The Committee said that they have been keeping a close eye on the latest trends in global and domestic markets, as well as changes in capital flows. They will use multiple monetary tools to maintain moderate levels of liquidity.
In terms of China’s growth, Fang Gang, a member from the Committee, said that China’s economy has been slowing down over the past five years. The economy might continue to slow down in 2016 to some extent, but most likely the condition will be stabilizing.
National Bureau of Statistics of China (NBS)
- The state agency announced a revised method for calculating China’s GDP gauges. Under the revised rule, research and development (R & D) expenditures can be classified as capital rather than as a cost. This change is made in line with the change in international norms recommended by the United Nations, which has updated the R & D classification in the 2008 System of National Accounts. NBS said that the adjustment intends to better reflect the contribution of innovation to the economic growth and to promote additional innovations in China.
With this adjustment, China’s GDP in 2015 was increased by 879.8 billion Yuan. The growth in 2015 was 0.04% higher than the original release. This also affects China’s industrial structure: the weightings of the agricultural sector, the manufacturing sector and the tertiary sector in 2015 changed to 8.9%, 40.9% and 50.2% respectively from 9.0%, 40.5% and 50.5%.
China’s 2Q’2016 GDP is scheduled to be released on July 14th. The consensus forecast for the GDP print from Bloomberg is for growth of 6.6%, lower than the 6.7% GDP growth seen in the first quarter.
Sina News: China’s most important online media source, similar to CNN in the US. They also own a Chinese version of Twitter, called Weibo, with around 200 million active usersmonthly.
- China’s foreign exchange regulator addressed on the capital flow issue. On July 5th, the Deputy Director of State Administration of Foreign Exchange, Fang Shangpu, said that “China’s foreign reserves have dropped from its peak level of $3.98 trillion to the current level of $3.20 trillion. The regulator introduced multiple measures in the effort of proactively coping with the issue. With these measures, China’s capital outflow pressure has been eased since March, following the elevated volatility seen in January and February.”
- The State Council launched new guidance in the effort of promoting private investment. Private investment, which is non-government and non-state-owned-enterprise investment, has accounted for approximate 60% of China’s GDP and contributed to 80% of overall employment. Also, private investment has taken up over 60% of the total fixed investment in China. However, the growth in private investment dropped by -6.2% over the first five months of 2016. Financing difficulty is one of the top issues that private investors are facing. Thus, the State Council requires the banking regulator, CBRC, to conduct investigations and demand commercial banks to support private investment in a proper way.