MNI China Daily Summary: Thursday, July 12

     TOP NEWS: Now is not an appropriate time for Beijing and Washington to

engage in trade talks given that the U.S. currently appears keen on escalating,

rather than de-escalating, rising trade tensions, He Weiwen, former Economic and

Commercial Counselor at Chinese Consulates General in San Francisco and New

York, told MNI. 

     TOP NEWS: China will further improve its business environment, protect the

interests of foreign companies, and become the first choice for foreign

investments, the Ministry of Commerce said in a briefing in Beijing today. U.S.

trade sanctions have no basis in international law, spokesman Gao Feng said.

China and U.S. have not resumed talks on trade, he said. China doesn't accept

charges that it has engaged in forcing foreign companies to transfer technology,

Gao said.

     YUAN: USDCNH is off its highs, but continues to look bullish with the June

3 high increasingly at risk. The strength seen from July 3 to July 10 appears to

have been corrective, with the primary trend for further dollar strength. The

yuan's effective exchange rate has continued its steady decline, in line with

the view we put out last week noting that the yuan's decline relative to its

peers has not been large enough to significantly boost competitiveness.

     LIQUIDITY: The People's Bank of China (PBOC) left liquidity after injecting

CNY30 billion by 7-day reverse repos on Thursday, which netting off the same

amount of reverse repos maturing, according to data on the central bank's

website. CFETS-ICAP's money-market sentiment index closed at 38 on Wednesday,

remaining unchanged from Tuesday.

     MONEY MARKET RATES: Benchmark 7-day deposit repo average fell to 2.6421% on

Thursday from 2.6571% on Wednesday; Overnight average increased to 2.4673% from

2.3843% on Wednesday: Wind Information.

     YUAN: The yuan opened at 6.7000 against the U.S. dollar Thursday, weaker

than Wednesday's official close of 6.6674 and also weaker than today's central

parity rate of 6.6726 set by the PBOC. Today's central parity rate had the

biggest daily drop since January 9, 2017. 

     BONDS: The yield on benchmark 10-year China Government Bond was last at

3.5150%, up from the previous close of 3.5000%, according to Wind Information.

     STOCKS: Shares in Shanghai rose today, with some markets shrugging off some

of the trade impacts. Shanghai Composite Index closed 2.16% higher at 2837.66,

regaining the 2800 mark. Shares of ZTE climbed by the 10 percent daily limit in

Shanghai after the U.S. and ZTE reached a deal to lift export ban. Hong Kong's

Hang Seng Index rose 0.75% to 28524.58. 

     FROM THE PRESS: China is fully prepared to use both quantitative and

qualitative countermeasures to strike back against U.S. protectionism, Xinhua

News Agency said in a commentary. The tariff will not entirely block American

enterprises from seeking cooperation with China, as electric vehicles giant

Tesla will build its first factory outside US in Shanghai; and as U.S. trade

representatives, led by Chicago Mayor Rahm Emanuel, secured a deal for rail cars

in China yesterday. China's retaliation is "legitimate defense" adhering to

international morals and rules, the news agency said. China will firmly respond

to coercive and accelerated protectionist measures with calmness and

rationality, Xinhua said.

     China needs to adjust its export-oriented development strategy to offset

the negative impacts of the trade war, Zhou Dadi, former director of Energy

Research Institute under National Development and Reform Commission (NDRC), said

in a commentary published in 21st Century Business Herald. The quantitative

expansion of low-value added products is no longer enough to support China's

development; instead, China needs to initiate new consumption areas and demands,

drive technology innovation, and master intellectual property rights, wrote

Zhou. China can increase its export competitiveness only if it becomes a leader

in consumption quality in the world, Zhou said.

     More than 20 cities have published new real estate regulatory measures in

the first half of July, the 21st Century Business Herald reported. The

regulatory measures have been refined, and they target central and western China

as well as third- and fourth-tier cities, according to the newspaper. Due to the

acceleration in regulation, highly restrictive policies are expected in the

second half of the year, the newspaper noted, citing experts. Local governments

should pay more attention to the supply end to solve the conflict of low

inventories and strict price limits, the newspaper reported citing China

Securities Cooperation.

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

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

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