MNI China Daily Summary: Monday, June 8

     REALITY CHECK: China's consumer price index will likely ease further in May

as pork prices, a key inflation driver, continue to fall due to weakening

restaurant sales, industry insiders told MNI.

     DATA: China's trade performance worsened in May as the pandemic sapped

global demand. Exports declined 3.3% y/y to $206.81 billion in May, reversing

3.5% y/y uptick in April, dragged by the contracting overseas orders. May

imports from all sources fell 16.7% y/y to $143.89 billion, extending last

month's 14.2% decline.

     LIQUIDITY: The People's Bank of China (PBOC) injected CNY120 billion via

7-day reverse repos with the rate unchanged at 2.2%. This resulted in a net

drain of CNY380 billion given the maturity of CNY500 billion of reverse repos,

according to Wind Information. The operation aims to keep the liquidity

reasonable and ample, the PBOC said in a statement on its website. The central

bank also noted that it will renew the medium-term lending facility (MLF) due

this month around June 15, and the amount of rollover will be determined

according to market demand.

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

institutions (DR007) fell to 1.9073% from Friday's close of 1.9351%, Wind

Information showed. The overnight repo average increased to 1.8832% from the

previous 1.5687%.

     YUAN: The currency strengthened to 7.0743 against the dollar from 7.0866 on

Friday. PBOC set the dollar-yuan central parity rate lower for a sixth day at

7.0882, compared with the 7.0965 set last Friday.

     BONDS: The yield on 10-year China Government Bond was last at 2.8175%, down

from the close of 2.8600% on Friday, according to Wind Information. 

     STOCKS: The Shanghai Composite Index rose 0.24% to 2,937.77. Hang Seng

Index edged up 0.03% to 24,776.77.

     FROM THE PRESS: The PBOC is likely to inject liquidity through reverse

repos this month but is unlikely to lower any interest rates so to prevent

traders from arbitraging on the large liquidity, the Securities Daily reported

citing Li Qilin, chief economist of Yuekai Securities. Liquidity pressure would

normally increase in June due to mid-year assessments, tax payments and

cross-seasonal factors, and the maturity of MLF and increased bond issuance this

month also weigh on liquidity, the newspaper said. There will be CNY720 billion

instruments maturing in the open market this week, the newspaper added. 

     A COVID-19 vaccine could be put into emergency use as early as this fall,

said China's top infectious disease expert Zhong Nanshan on Saturday, according

to the People's Daily's Weibo account. It takes 60-70% of a country's population

to be infected by the virus to create natural immunity, risking lives of 30-40

million, so the solution is mass vaccination, Zhong was quoted saying. There are

six vaccines currently undergoing clinical trials, according to the Daily.

--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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