MNI China Daily Summary: Monday, June 17

     POLICY: China is devising new policies recognizing rare earths as strategic

resources, said spokeswoman Meng Wei of the National Development and Reform

Commission. China won't allow other nations to use its exported rare earths to

curb its development, but will still meet legitimate demand, Meng said in a

briefing today. China will establish a full traceability and review mechanism

for rare earths' exports, said Meng.

     TRADE: China must be highly on guard against "strange and irrational"

voices from within the country including those advocating giving in to U.S.

demand, which mislead the public and undermine the determination to fight, Shi

Jianxun, a government-affiliated economist and professor at Tongji University,

wrote in a commentary published by the Economic Daily on Sunday. China has

earlier made concessions in negotiations during the conflicts that were

initiated by "very few politicians" in the U.S., but fear and surrender won't

work when the true U.S. intention is to curb China's development, so China must

recognize the reality, "answer the war courageously and stop the war by

fighting" in order to achieve peace, wrote Shi, who was also described as a

deputy director of a research center for studying Xi Jinping's thoughts in

Shanghai. Shi also dismissed the theory that the trade war is a "clash of

civilizations" and criticized those who said the war was provoked by China's

challenge for U.S. supremacy, which then led it to recognize China as a

competitor that must be contained. 

     TRADE: China can only fight to the end against the U.S. threats to escalate

the trade frictions and retreat isn't an option, said Qiu Shi, an official

magazine of the Communist Party of China on Sunday. Some Americans believe in

zero-sum game and hegemony, and the only fair trade relations they consider with

China is one in which the U.S. alone takes profits, the magazine said. The U.S.

wants to contain and suppress China's development as it sees China as its

competitor, it said.

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

14-day reverse repos today, adding liquidity for a 10th day. This resulted in a

net injection of CNY120 billion after the impact of CNY30 billion maturing

reverse repos, according to Wind Information. The injection aims to offset the

impact of the tax season and local government bond issuance and stabilize the

liquidity conditions at midyear, the PBOC said in a statement. Today's

operations also took account of CNY100 billion addition in long-term funds

resulting from the second phase of a previously announced RRR cut for rural

banks and cooperatives, with the first phase conducted on May 15, said the PBOC.

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

institutions (DR007) fell to 2.3000% from Friday's close of 2.4960%, Wind

Information showed. The overnight repo average increased to 1.8000% from

Friday's 1.7123%.

     YUAN: The yuan weakened to 6.9254 from Friday's close of 6.9236. The PBOC

set the dollar-yuan central parity rate weaker for a fifth trading day at 6.8940

today, compared with 6.8937 set last Friday.

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

down from Friday's close of 3.2500%, according to Wind Information.

     STOCKS: The benchmark Shanghai Composite Index increased 0.20% to 2,887.62.

Hong Kong's Hang Seng Index rose 0.40% to 27,227.16.

     FROM THE PRESS: The PBOC will seek to restructure the failing Baoshang Bank

that it took over after properly accounting for its assets, the PBOC's Financial

News newspaper said in a question-and-answer report with an unidentified central

bank official. The lender successfully sold NCDs four times June 3-14 and its

deposit service is also operating normally, the official said. The "vast

majority" of Baoshang Bank's CNY30 billion maturing interbank funds since the

seizure chose to remain with the bank, the official said.

     China's stock market was fueled by the prospect of global monetary easing

and domestic policies boosting consumption and infrastructure investment, the

China Securities Journal said in a report. The opening of the SSE STAR, the

high-tech board, was also having a positive impact, the newspaper 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

[TOPICS: M$A$$$,M$Q$$$,MBQ$$$]