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China’s Market News:Yuan Borrowing Rate Soars in Offshore Market

China’s Market News:Yuan Borrowing Rate Soars in Offshore Market

Renee Mu, Currency Analyst

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.

- Hong Kong’s overnight interbank Yuan borrowing rate nearly doubled on July 12th.

- The PBOC continued to tighten liquidity onshore in general except to target financial institutions.

- The New Development Bank plans to issue 3 billion Yuan of Green Bonds in mainland China.

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Hexun News: Chinese leading online media of financial news.

- The interbank overnight Yuan borrowing rate in the Hong Kong offshore market soared on July 13th. The so-called HIBOR jumped +2.4600% to 4.8310% on Wednesday, the highest level in two months. At the same time, the offshore Yuan rate (USD/CNH) increased +0.23% in the earlier Asian session and touched 6.6789, the strongest level seen since June 29th. Early this year, the offshore Yuan rate once jumped to 66.82% following tightened liquidity in the offshore market.

- The PBOC issued 30 billion Yuan of 7-day reverse repos on Wednesday, evening-out the 30 billion Yuan of reverse repos maturing on the day. The net liquidity added was 0. At the same time, the Central Bank provided 259 billion Yuan of Medium-term Lending Facility (MLF) to 13 target financial institutions. This includes 101 billion Yuan of 3-month MLF, 101.5 billion Yuan of 6-month MLF and 56.5 billion Yuan of 1-year MLF. These moves indicate that China’s Central Bank continues to tighten liquidity in a broad scope but offers supports to specific projects.

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 exports increased +1.3% in June to 1.17 trillion Yuan while imports dropped -2.3% to 863.3 billion Yuan. In terms of countries, trade with One-Belt-One-Road countries increased the most: over the first half of 2016, Chinese exports to Pakistan, Russia, Bangladesh, India and Egypt rose +22.5%,+16.6%, +9%,+7.8% and +4.7% respectively. However, exports to the US, China’s second-largest trade partner, dropped -4.6%. Also, imports in iron ore, crude oil, copper and other commodities continue to increase despite China’s national-wide production cuts. This indicates that over-capacity in Chinese energy and manufacturing sectors is not only led by a relative low domestic demand but also because of lower quality-to-price in Chinese products compared with overseas products. Thus, the Chinese government has been promoting domestic innovations.

China Finance Information: a finance online media administrated by Xinhua Agency.

- The New Development Bank, a multilateral development bank established by the BRICS countries, said it will issue 3 billion Yuan of Green Bonds in China’s interbank market on July 18th. This will be the first Green Bonds issued by a multilateral development bank. The BRICS countries are Brazil, Russia, India, China and South Africa. As China’s domestic bond market continues to open up, Panda Bonds are developing fast; the issuance of Panda Bonds has already exceeded Dim-sum Bonds. Panda Bonds refer to Yuan-denominated bonds issued by a non-Chinese issuer and sold in mainland China. Dim-sum bonds refer to Yuan-denominated issued in the offshore markets, such as in Hong Kong. As of July, Panda Bonds issued in mainland has reached 23.1 billion Yuan while the Dim-sum bonds issued by Chinese institutions were only 3.8 billion Yuan.

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.