MNI China Daily Summary: Monday, June 6

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY2 billion via 7-day reverse repos, with the rates unchanged at 2.00%. The operation has led to a net drain of CNY23 billion after offsetting the maturity of CNY25 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: The seven-day weighted average interbank repo rate for depository institutions (DR007) increased to 1.7977% from 1.7783%, Wind Information showed. The overnight repo average decreased to 1.2311% from 1.3006%.

YUAN: The currency weakened to 7.1185 against the dollar from 7.0750 on Friday. The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 7.0904, compared with 7.0939 set on Friday

BONDS: The yield on 10-year China Government Bonds was last at 2.7575%, closing flat from Friday, according to Wind Information.

STOCKS: The Shanghai Composite Index edged up 0.07% to 3,232.44, while the CSI300 fell 0.46% to 3,844.25 The Hang Seng Index was down 0.84% to 19,108.50.

FROM THE PRESS: China will optimise tax reduction and exemption policies for new energy vehicles (NEV), according to a recent State Council meeting. Leaders noted developing the NEV market was key to upgrading the automotive industry and would support the sustained recovery of the wider economy. The NEV industry will receive support to strengthen core technology and develop intelligent driving systems, the council said. Cui Dongshu, secretary general at the National Passenger Car Market Association, said policy support would increase NEV consumption and promote sustainable growth in the industry. (Source: Yicai)

China needs to transition away from its investment-led growth model and rebalance national income towards household consumption, according to Teng Tai, president at Wanbo New Economy Research Institute. Teng said the economy’s investment led growth model was increasingly unproductive and achieving the Government’s Strategic Plan for Expanding Domestic Demand (2022-2035) depended on boosting the household share of national income. The Government can achieve rebalancing through reforms to taxation and eliminating excess profits in land, finance, information technology services, energy, and increasing transfer payments. (Source: Yicai)

Qingdao's local government will introduce new policies to support the housing market, according to the Qingdao Housing and Urban Rural Development Bureau. Local authorities issued a notice detailing the support measures, which included lowering down payments and increasing consumption vouchers. Authorities said they would prioritise help for young people and also buyers wanting to purchase new builds. In the rental market, enterprises will be supported to issue bonds for the construction of rental property. (Source: Yicai)