MNI China Daily Summary: Friday, May 26

POLICY: China’s Chengxin Credit Rating Group has downgraded the U.S. Government's credit rating to AA+ from AAA, noting rapidly rising interest rates, persistent inflation and difficulties raising the debt ceiling could lead to further economic volatility, according to a statement on the CCXI website .

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY5 billion via 7-day reverse repos, with the rates unchanged at 2.00%. The operation has led to a net injection of CNY3 billion after offsetting the maturity of CNY2 billion reverse repo today, according to Wind Information. The operation aims to keep banking system liquidity reasonable and ample, the PBOC said on its website.

RATES: China's seven-day weighted average interbank repo rate for depository institutions (DR007) increased to 1.9935% from 1.9235%, Wind Information showed. The overnight repo average decreased to 1.4008% from the previous 1.5546%.

YUAN: The currency strengthened to 7.0547 against the dollar from 7.0686 on Thursday. The PBOC set the dollar-yuan central parity rate higher at 7.0760, compared with 7.0529 set on Thursday.

BONDS: The yield on 10-year China Government Bonds was last at 2.7600%, up from 2.7550% at Thursday's close, according to Wind Information.

STOCKS: The Shanghai Composite Index edged up 0.35% to 3,212.50 while the CSI300 index rose 0.01% to 3,850.95. The Hang Seng Index was down 1.93% to 18,746.92.

FROM THE PRESS: The Government will deliver a package of policies to support SOE engagement in strategic emerging industries, according to Zhang Yuzhuo, director at the State-owned Assets Supervision and Administration Commission. At a recent working group meeting, Zhang said SOEs needed policy support to develop emerging industries and achieve high-quality development, and win future competition. China needed SOEs to become national champions, make breakthroughs in core technologies and build industrial clusters in key sectors. (21st Century Herald)

The Shanghai government will provide better services and supporting policies to develop emerging industries and deep technology, Gong Zheng, Shanghai's mayor said on a recent industrial tour. Shanghai needed to become a global centre for science and technology, and promote integration between innovation and industry. The mayor also highlighted Pudong New Area and Lingang Free Trade Zone as areas where recent legislation supported the development of high tech clusters. (Source: Yicai)

Authorities in Beijing will take measures to enrich the product offering of China’s derivatives industry and accelerate high level opening up, according to He Qingwen, Chairman of the Financial Futures Exchange. At a recent forum He said foreign and domestic investor participation can be boosted by further opening up, as it will helping them overcome increased volatility in the capital markets. He acknowledged China’s derivatives market was still in its infancy and its product offering insufficient for the needs of investors. (Source: 21st Century Herald)