MNI China Daily Summary: Monday, May 24

EXCLUSIVE: The People's Bank of China is likely to keep liquidity stable unless the consumer price index rises over 3% year-on-year while continuing to restrict further credit expansion in the hot property market, policy advisors told MNI, an approach aimed at supporting growth and curbing major risk.

LIQUIDITY: The PBOC injected CNY10 billion via 7-day reverse repos with the rate unchanged at 2.2% on Monday. The operation left liquidity unchanged given it netted off CNY10 billion reverse repos maturing today, according to Wind Information. The operation aims to keep liquidity reasonable and ample, the PBOC said on its website.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) rose to 2.1351% from 2.1098% on Friday, Wind Information showed. The overnight repo average increased to 2.1757% from the previous 1.9700%.

YUAN: The currency strengthened to 6.4293 against the dollar from 6.4337 on Friday. The PBOC set the dollar-yuan central parity rate higher at 6.4408, compared with the 6.4300 set on Friday.

BONDS: The yield on 10-year China Government Bond was last at 3.0700%, flat from the close of Friday, according to Wind Information.

STOCKS: The Shanghai Composite Index edged up 0.31% to 3,497.28 while the CSI300 index rose 0.42% to 5,155.59. Hang Seng Index edged down 0.16% to 28,412.26.

FROM THE PRESS: The People's Bank of China is likely to refrain from setting exchange rate targets for the yuan while allowing it to gain against the U.S. dollar in the medium to long term, Yicai.com reported citing analysts. Over the weekend, PBOC Deputy Governor Liu Guoqiang said the yuan's two-way fluctuation has become the norm and its future trading will be decided by supply and demand as well as the international financial markets. The yuan's recent appreciation was mainly due to the weakening dollar index, while fundamentals like China's economic recovery and balance of payments have not significantly changed, the newspaper said citing Guan Tao, the chief economist of Bank of China International and a former forex official. The yuan has continued to strengthen since April and traded around 6.4-6.5 against the dollar. Last week, the central parity rate nearly reached the high of 6.4235 on June 19, 2018.

Chinese regulatory authorities must step up supervision over cryptocurrency speculations and transactional risks, and all parties should work together to crack down on the market chaos and illegal and criminal behaviors, the Xinhua News Agency said in a commentary. Cryptocurrencies are essentially a virtual commodity without underlying value, while misleading marketing information can intentionally amplify the illusion of high rates of return to lure investors, Xinhua said, calling for consumers to shun its trading. The cryptocurrency market has experienced multiple slumps since mid-May, with the price of Bitcoin shrinking by more than 30% from the highest point at the beginning of May, the newspaper said.

Lithuania, which over the weekend said it is quitting the "17+1", a central and eastern European cooperation framework with China, has become a tool of competition between the U.S. and China by aggressively provoking China on issues from Xinjiang to Taiwan, the Global Times said in an editorial, telling it to stay off China's core interests. Lithuania has been politically radical, often acting as a flag raiser for anti-Russia moves and has had poor relations with neighboring countries such as Belarus, said the newspaper owned by the People's Daily, When such a small country is aggressive, it will invite trouble and "reap what it has sown," given the region's complex geopolitics and "old hatreds," the newspaper warned.