MNI China Daily Summary: Monday, May 6

     TOP NEWS: The benchmark Shanghai Composite Index fell 5.58% to 2906.46

following U.S. President Donald Trump threatened to hike tariffs on $200 billion

of Chinese goods to 25% on Friday from 10%. It was the largest drop in over

three years, with more than 1000 shares traded in the Shanghai and Shenzhen

stock exchanges plunging sharply to hit the limit down, Wind Information said.

Hong Kong's Hang Seng Index decreased 2.90% to 29,209.82.

     TRADE: China's trade team is preparing to visit the U.S. for another round

of negotiation, said Geng Shuang, the spokesman of the Ministry of Foreign

Affairs, without stating if Vice Premier Liu He will lead the delegation after

U.S. President Donald Trump had threatened to raise tariffs again, The Paper

reported. China had faced similar situations and still hopes the two sides work

together to reach an agreement on the basis of mutual respect, Geng said

according to the newspaper.

     PBOC: The People's Bank of China (PBOC) cut reserve requirement ratio to 8%

for county-level rural commercial banks with assets of less than CNY10 billion

yuan, effective May 15, releasing about CNY280 billion long-term funds intended

for loaning private and small enterprises, according to a statement on the

central bank's website. About 1,000 medium and small-sized banks will receive

the cut, the PBOC said. 

- Current RRRs of China's small and medium-sized commercial banks is at 11.5%,

high relative to other countries, leaving room for cuts, said the PBOC-run

newspaper Financial News citing Li Peijia, senior researcher at the BOC

Institute of International Finance.

     DATA: The Caixin China general services PMI index rose 0.1 to 54.5 in April

from March, a sign of expanding service industry in China. The gauge of China's

smaller service companies is now at the second-highest level since June 2012,

publisher Caixin said by email. The new orders sub-index continued to accelerate

moderately, while new export orders recorded the highest growth rate since the

end of 2014, reflecting stronger external demand and companies' increased

efforts to expand overseas market, Caixin said.

     LIQUIDITY: The PBOC injected CNY20 billion via 7-day reverse repos today,

netting CNY20 billion given no other reverse repos mature today, according to

Wind Information.

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

institutions (DR007) fell to 2.4000% from the close of 2.4020% on Sunday, Wind

data showed. The overnight repo average fell to 1.6400% from 1.7815% on Sunday.

     YUAN: The yuan weakened to 6.7666 against the U.S. dollar from the close of

6.7366 on April 30, the last day before a 3-day public holiday. The PBOC set the

dollar-yuan central parity rate at 6.7344 today, weaker than 6.7286 set on April

30.

     BONDS: The yield on the 10-year China Government Bond (CGB) was last at

3.3400%, down from the close of 3.3800% on April 30, according to brokers.

     FROM THE PRESS: China's economy may experience a significant rebound in

May, peaking in October before slowing by the beginning of next year, the

Economic Observer reported citing Liu Shijin, a member of the PBOC's monetary

policy committee. The growth is unlikely to have a V- or U-shaped trajectory,

and it's not possible to repeat the rapid growth seen in the past, Liu was cited

as saying.

     Home-purchase regulations in popular second-tier cities may be tightened in

Q2, as the surging home and land transactions in these cities drew scrutiny from

regulators, said Economic Information Daily citing Zhang Dawei, chief analyst at

Centaline Property. The total turnover of second-hand housing in 10 second-tier

cities including Nanjing, Xiamen and Qingdao increased 25.9% m/m in April, and

some cities experienced the highest turnovers in two years, the newspaper said

citing a report by Shanghai E-House Real Estate Research Institute.

     China's new regulation on investment released by the State Council on

Sunday will help direct funding to the most urgent areas while controlling

government debt financing, said China Securities Journal in an op-ed commentary

today. The new rules clarify that public funds should be invested in public

sectors such as social services, infrastructure and security, where resources

cannot be effectively allocated, 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$$$]