MNI China Daily Summary: Friday, July 5

     EXCLUSIVE: China and the U.S. could reach a preliminary trade agreement as

soon as this September, following the green light for a resumption in the talks,

although not everyone is optimistic about the chances of a quick deal,

government advisors told MNI. "If the Trump administration stops flip-flopping

this time, it is possible for both sides to reach a preliminary agreement in

three months," said Chen Wenling, Chief Economist at the China Center for

International Economic Exchanges, a high-level government-back think tank. She

said U.S. President Donald Trump needs "achievements" that can help him secure

re-election next year and reaching a deal with China this year would help him

win a second term by countering domestic complaints from soybean farmers and

others. Defusing global trade tensions with a deal would also underpin U.S.

economic growth and employment in the run-up to the November 2020 vote.

     LIQUIDITY: The People's Bank of China (PBOC) skipped open market operations

(OMOs) for the 10th trading day, resulting in a net drain of CNY30 billion as

that amount of reverse repos matured, according to Wind Information. Total

liquidity in the banking system is at a relatively high level, enough to offset

the maturity of reverse repos, financial institutions' payments of deposit

reserve and government bond issuance, according to the PBOC.

     RATES: The 7-day weighted average interbank repo rate for depository

institutions (DR007) rose to 2.1709% from Thursday's close of 1.9751%, Wind

Information showed. The overnight repo average increased to 1.0579% from

Thursday's 0.8431%.

     YUAN: The yuan weakened to 6.8781 from Thursday's close of 6.8701. The PBOC

set the dollar-yuan central parity rate lower at 6.8697 today, compared with

6.8705 set on Thursday.

     BONDS: The yield on the 10-year China Government Bond was last at 3.1700%,

up from Thursday's close of 3.1450, according to Wind Information.

     STOCKS: The benchmark Shanghai Composite Index rose 0.19% to 3,011.06. Hong

Kong's Hang Seng Index edged down 0.07% to 28,774.83. 

     FROM THE PRESS: The National Development and Reform Commission is planning

new structures to foster more innovative infrastructure financing models,

according to a report in the Economic Information Daily. The commission was

working with other government departments on structures that would attract more

private capital to major projects, the daily reported. Finding stable sources of

funds for investment projects will be a key focus of finance system reform going

forward, the newspaper said.

     The current low-interest rate environment in Chinese money markets was

difficult to sustain, according to a report in the China Securities Journal. The

rates rates were being driven by ample levels of liquidity, which was expected

to moderate in the near term, the journal said citing analysts. Liquidity is

unlikely to be significantly tightened given that the PBOC still needs enough

liquidity to manage risks, stabilize economic growth and lower costs of

borrowing for small companies, the newspaper said citing reports by Huatai

Securities and Tianfeng Securities.

     Calls from U.S. business and government leaders for President Trump to

moderate his policies towards China showed the political diversity of U.S.

society, Global Times said in an editorial published late Thursday. Referring to

an open letter signed by 100 prominent Americans, expressing concern over

Trump's trade policies, the editorial said that even though there were rational

views in the U.S., they may not influence the actions of the White House and

State Department. China should be prepared for a long-term rivalry with the

U.S., the Global Times 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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