MNI China Daily Summary: Friday, July 17

     BEIJING (MNI) - EXCLUSIVE: China is likely to ease its fiscal stimulus in

the second half of the year as the economy surges, but also as government

revenues come under pressure and with an eye to rising public debt levels, an

advisor to the State Council told MNI.

     EXCLUSIVE: A potential Joe Biden presidency could improve U.S.-China

communications and maybe even revive hopes for a Phase Two trade deal, policy

advisors and government sources in Beijing told MNI, but they cautioned that the

trend for the world's two biggest economies to decouple significant parts of

their trade relationship would continue.

     POLICY: China's fiscal authorities will take action to deal with the

diminishing income levels of local governments and prevent the misuse of revenue

from increased special bond issuance, the Ministry of Finance told reporters

today. Total revenue contracted by 10.8% y/y in H1, compared with a 3.4%

increase in the same period of 2019, said Liu Jinyun, a senior official of the

Ministry, with falling tax revenues, down 11.3%, a result of the Covid-19

outbreak and tax relief measures enacted, which dragged down the revenue growth

by 10 percentage points.

     POLICY: The Chinese yuan was relatively stable in the first half,

fluctuating within a normal band against the U.S. dollar, said an official with

foreign exchange regulator today. The yuan's high against dollar was just 4.4%

higher than the low in Jan-Jun, reflecting the stability, said Wang Chunying, a

spokesperson with the State Administration of Foreign Exchange, adding that the

yuan ended the half 1.5% lower.

     POLICY: China will increase efforts to help enterprises with measures to

boost consumption and investment, along with reinforcing policy reserves for

future uncertainties, said Yan Pengcheng, head of national economy at the

National Development and Reform Commission (NDRC) today. The NDRC will introduce

measures to help industries and enterprises badly impacted by the pandemic, as

well as fine-tuning measures to cut rents, fees and interest rates already in

place, said Yan.

     LIQUIDITY: The People's Bank of China (PBOC) injected CNY200 billion via

7-day reverse repos with rates unchanged at 2.2% with no reverse repos maturing,

according to Wind Information. The operations aim to maintain the liquidity in

the banking system at a reasonable and ample level, the PBOC said on its

website.

     RATES: The seven-day weighted average interbank repo rate for depository

institutions (DR007) decreased to 2.2396% from Thursday's close of 2.2607%, Wind

Information showed. The overnight repo average increased to 2.3071% from 2.2806%

on Thursday.

     YUAN: The currency weakened to 6.9987 against the dollar from Thursday's

close of 6.9982. PBOC set the dollar-yuan central parity rate at 7.0043 from

6.9913 set on Thursday.

     BONDS: The yield on 10-year China Government Bonds was unchanged at

2.9500%, according to Wind Information.

     STOCKS: The Shanghai Composite Index gained 0.13% to 3,214.13. Hong Kong's

Hang Seng Index rose 0.47% to 25,089.17.

     FROM THE PRESS: China allowed 18 regional authorities to use CNY200 billion

special-purpose local government bonds to recapitalise regional banks, the

Shanghai Securities News reported citing Liu Rong, a deputy director overseeing

city commercial banks at the China Banking and Insurance Regulatory Commission.

Provincial governments will invest in local bank convertible bonds, the

newspaper said citing Hong Xiaoping, the deputy director in charge of rural

commercial banks.

     China should issue coupons and subside the purchase of home appliances and

automobiles, as well as investing in infrastructure, to boost the demand that is

recovering slower than production, the China Securities Journal said.

--MNI Beijing Bureau; +86 (10) 8532-5998; email: wanxia.lin@marketnews.com

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

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