MNI China Daily Summary: Monday, June 10

     SOURCES: The People's Bank of China (PBOC) is expected to further increase

its liquidity injections to prevent a jump in small banks' funding costs and a

possible liquidity crunch, amid rising concern over credit risk in the interbank

market after the central bank took over a troubled commercial lender, sources

told MNI. Since PBOC took over Inner-Mongolia-based Baoshang Bank May 24, citing

"severe credit risks", the central bank has tried to calm the market by

insisting that it was an isolated case and pumping in cash via its liquidity

tools and open market operations. "The central bank reacted very fast and

effectively to smooth market sentiment. Counter-cyclical policies will be

strengthened as necessary and policy flexibility will be further improved," a

source familiar with the PBOC's operations told MNI.

     DATA: Exports rose 1.1% y/y in May after a 2.7% drop reported in April,

beating the market survey conducted by MNI which projected 3.9% decrease, data

released by the General Administrative of Customs today showed. Imports plunged

8.5% y/y, tumbling from the 4.0% y/y gain in April, underperforming MNI's median

of -2.3% and marking the biggest monthly fall since August 2016. The trade

surplus in May, driven by strong exports, expanded to $41.65 billion from %13.84

billion in April, larger than the forecast of $28.5 billion.

     DATA: FX reserves rose by $6.05 billion to $3.1010 trillion in May, up from

April's $3.0950 trillion, data released by the State Administration of Foreign

Exchange today showed.

     LIQUIDITY: The PBOC injected CNY30 billion via 7-day reverse repos, adding

liquidity for the fifth day. This resulted in a net drain of CNY50 billion given

that CNY80 billion of reverse repos matured today, according to Wind

Information.

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

institutions (DR007) fell to 2.4800% from Thursday's close of 2.5020%, Wind

Information showed. The overnight repo average increased to 1.7500% from

Thursday's 1.5216%.

     YUAN: The yuan weakened to 6.9332 from Thursday's close of 6.9161. The PBOC

set the dollar-yuan central parity rate at 6.8925 today, compared with 6.8945

set on June 6, the last trading day in the previous week.

     BONDS: The yield on the 10-year China Government Bond was last at 3.2400%,

flat from Thursday's close, according to Wind Information.

     STOCKS: The benchmark Shanghai Composite Index increased 0.86% to 2,852.13.

Hong Kong's Hang Seng Index rose 2.27% to 27,578.64.

     FROM THE PRESS: Beijing's latest plan to set up a national technological

security management list system is of practical significance to counter U.S.

moves to curb supply or technical transfers to some of China's high-tech

enterprises, the Global Times said in an opinion piece Sunday. The move is

expected to provide a legal basis for China to curb some technology exports to

the U.S., according to the paper.

     The China Banking and Insurance Regulatory Commission will hire leading

domestic accounting and law firms to check the assets and liabilities, accounts,

debtors-creditor relationships, valuation and capital of Baoshang bank, the

small lender seized by the PBOC and CBIRC, a spokesman told the PBOC-run

newspaper Financial News Sunday. China's medium and small-sized banks are

operating smoothly with enough liquidity, and large-scale commercial banks will

continue to conduct inter-bank business with them, the newspaper said citing the

regulator.

     China has enough room for macroeconomic policy manoeuvre and plenty of

policy tools, and is able to confront with different uncertainties, Yi Gang,

governor of the PBOC told the G20 Finance Ministers and Central Bank Governors

meeting, according to the statement on the PBOC website late Sunday. The PBOC

will keep matching the growth rate of broad money supply as well as total social

financial with the nominal GDP growth, liberalizing the exchange rate and

stabilizing the yuan exchange rate at a balanced level, Yi 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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