MNI China Daily Summary: Friday, June 4

     LIQUIDITY: The People's Bank of China (PBOC) injected CNY150 billion via

7-day reverse repos with the rate unchanged at 2.2% on Friday. This resulted in

a net drain of CNY150 billion given the maturity of CNY300 billion of reverse

repos, according to Wind Information. The operation aimed to offset the maturity

of reverse repos and the impact of government bond issuances, the PBOC said in a

statement on its website.

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

institutions (DR007) fell to 1.9351% from Thursday's close 1.9819%, Wind

Information showed. Overnight repo average fell to 1.5687% from 1.9323%

yesterday. 

     YUAN: The yuan strengthened to 7.0866 against the dollar from Thursday's

close 7.1233. PBOC set the dollar-yuan central parity rate stronger for a fifth

day at 7.0965, compared with the 7.1012 set on Thursday.

     BONDS: The yield on 10-year China Government Bonds was last at 2.8600%, up

from Thursday's close of 2.8350%, according to Wind Information.

     STOCKS: The Shanghai Composite Index rose 0.40% to 2,930.80. Hong Kong's

Hang Seng Index gained 1.66% to 24,770.41. 

     FROM THE PRESS: The PBOC will firmly support the development of Hong Kong

as an international financial centre and will guarantee the economic and

financial stability of the city, the central bank said in a statement on its

website. The PBOC will prioritize the implementation of two recent policies

delaying repayments on small business loans and purchasing some credit loans,

preventing financial sector risks, read the statement.

     The People's Bank of China is expected to slow the pace of monetary easing

and focus on targeted measures as the economy recovers from the pandemic

disruptions, according to a report in the China Securities Journal. Citing

analysts, the Journal's report says the central bank changes do not mean a

policy U-turn, but a flexible approach to prevent flooding the market. The PBOC

will increase its liquidity injections by a possible reserve requirement ratio

cut in June, supporting the large issuance of government bonds and deal with the

maturity of the medium-term facility, analysts predicted.

     China's consumer price index may continue to ease in May to below 3.0% y/y

due to declining pork prices and the lagging impact of oil, the Economic

Information Daily reported Friday, citing institutions. "May CPI might slow to

2.6% on a yearly basis as vegetables and pork prices are falling down along with

the improved supply," Lu Zhengwei, chief economist with Industrial Bank of China

told the Daily.

     Industrial output in China is likely to recover to the level of before the

Covid-19 outbreak, helped by a narrowing in the decline in fixed-asset

investment and retail sales, Shanghai Securities News reported. China's industry

will show its resilience by responding to the severe and complicated situation,

as the system is complete and demand large, Lian Ping, the chief economist with

Zhixin Fund, told the News. 

--MNI Beijing Bureau; tel: +86 (10) 8532-5998; email: flora.guo@marketnews.com

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

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