MNI China Daily Summary: Monday, May 12

     EXCLUSIVE: The People's Bank of China could facilitate a likely CNY1

trillion-plus issuance of special government treasury bonds by buying them in

the secondary market or by freeing up liquidity for banks to purchase them, but

the PBOC is unlikely to do what some policymakers have suggested and acquire

them directly, policy advisors told MNI.

     TOPNEWS: China announced to exempt another 79 U.S. products from

retaliatory tariffs imposed by China since next Tuesday suggesting the country

continues to implement the Phase One trade deal despite the escalating war of

words.  

     DATA: China's April inflation slowed to 3.3% y/y from 4.3% in March as food

supplies rose following the easing of the coronavirus outbreak. The April result

was the lowest level since September last year. Analysts had expected 3.7% y/y.

     LIQUIDITY: The PBOC skipped open market operations for the 10th day,

leaving liquidity unchanged, according to Wind Information. Liquidity in the

banking system is reasonable and ample, the PBOC said on its website.

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

institutions (DR007) decreased to 1.2000% from Monday's close of 1.2719%, Wind

Information showed. The overnight repo average decreased to 0.7837% from the

previous 0.8586%.

     YUAN: The currency weakened to 7.0886 against the dollar from 7.0873 on

Monday. PBOC set the dollar-yuan central parity rate higher at 7.0919 on Monday,

up from the 7.0769 set on Monday.

     BONDS: The yield on 10-year China Government Bond was last at 2.6425%, up

from the close of 2.6400% on Monday, according to Wind Information. 

     STOCKS: The Shanghai Composite Index edged down 0.11% to 2,891.56. Hang

Seng Index fell 1.45% to 24,245.68.

     FROM THE PRESS: Chines advisors close to the trade talks with the U.S.

suggested Chinese officials could invalidate the trade pact and negotiate a new

one to tilt the scales more to the Chinese side, the government-run Global Times

reported citing unidentified sources. Some are calling for new negotiations and

a tit-for-tat approach on growing trade issues to counter "malicious attacks" on

China, the newspaper reported citing sources close to the Chinese government.

China could do so on force majeure provisions in the pact, the newspaper said

citing a former Chinese trade official. Global Times, which publishes in both

Chinese and English, is owned by the People's Daily, the official newspaper of

the Communist Party.

     Depreciation pressure on the yuan kept the PBOC from injecting liquidity

into the market to match surging government bond issuance in May, the Securities

Daily reported by citing Ming Ming, the chief fixed-income analyst with Citic

Securities. Local government bond issuances this month will set a new record

this month at more than CNY200, the newspaper reported citing data from Wind

Information. The PBOC hasn't made any major moves since mid-April, when it

lowered the required reserve ratio for targeted financial institutions.

--MNI Beijing Bureau; +86 (10) 8532-5998; email: archie.zhang@marketnews.com

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

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