MNI China Daily Summary: Thursday, July 16

     POLICY: China won't become complacent and will keep flexible policies in

place to ensure the economic recovery continues to strengthen in the second

half, spokeswoman Liu Aihua of the National Bureau of Statistics said at a

briefing on Thursday. While the strong rebound seen in June is likely to extend

in the second half given a combination of investments and new industries, most

indicators are declining in terms of overall first-half performance, including

GDP, industrial production, service and consumption, Liu said when asked if

policymakers see fit to retreat from monetary and fiscal stimulus measures.

     POLICY: China will take "necessary measures" after the British government's

move to exclude Huawei from its 5G network construction, said Gao Feng,

spokesman of the Ministry of Commerce at a briefing on Thursday. "China is

making an assessment and will take the necessary measures to resolutely defend

the legitimate rights of Chinese enterprises," said Gao, without further

explanation as to what the measures were.

     POLICY: China's Vice Foreign Minister Zheng Zeguang summoned U.S.

Ambassador Terry Branstad on Wednesday to protest against the Hong Kong Autonomy

Act, which was signed by President Donald Trump this week, clearing the way for

Washington to sanction Chinese officials and financial institutions. Zheng told

Branstad that China would make the necessary responses to U.S. actions including

sanctioning U.S. individuals and entities, according to a statement on China's

Ministry of Foreign Affairs website.

     DATA: China's GDP surged 3.2% y/y in Q2, sharply reversing the 6.8% drop in

Q1 and outperforming the 2.6% gain projected by economists. Industrial

production grew for the third month at 4.8% in June, accelerating from the 4.4%

gain in May, and in line with the forecast. Retail sales fell 1.8% y/y in June,

recovering from the 2.8% decline in May. Fixed-asset Investment fell 3.1% y/y

for the first half, narrowing from the 6.3% fall in the Jan-May period and

better than the -3.5% projection. Infrastructure investment growth recovered to

-2.7% y/y in the Jan-June period from the 6.3% fall in the first five months.

Registered urban unemployment decelerated to 5.7% in June from May's 5.9%.

     DATA: Foreign direct investment (FDI) into China in June rose 3.7% y/y to

USD16.72 billion, data by the Ministry of Commerce on Thursday showed. That

compared with 4.2% y/y gain to USD9.87 billion in May. FDI in H1 declined 4% to

USD67.93 billion, compared to 13.5% slump in Q1, the ministry said.

     LIQUIDITY: The People's Bank of China (PBOC) injected CNY50 billion via

7-day reverse repos with rates unchanged at 2.2% with no reverse repos maturing

today, according to Wind Information. The operations aim to maintain the

liquidity in the banking system at a reasonable and ample level, the PBOC said

on its website.

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

institutions (DR007) rose to 2.2592% from Wednesday's close of 2.1556%, Wind

Information showed. The overnight repo average increased to 2.2758% from the

previous 2.0397%.

     YUAN: The currency strengthened to 6.9982 against the dollar from 6.9986 on

Wednesday. PBOC set the dollar-yuan central parity rate lower at 6.9913 ,

compared with the 6.9982 for Wednesday.

     BONDS: The yield on 10-year China Government Bond was last at 2.9450%, down

from the close of 2.9550% on Wednesday, according to Wind Information. 

     STOCKS: The Shanghai Composite Index plunged 4.5% to 3,2010.10. Hang Seng

Index fell 2% to 24970.69.

     FROM THE PRESS: China will retaliate against the U.S. if it does not stop

interfering in Hong Kong and other Chinese internal affairs, the official

People's Daily said in a commentary. The U.S. had used typical "hegemonic

thinking and bandit logic" to enact the Hong Kong Autonomy Act, and this

external pressure won't shake China's determination to safeguard its sovereignty

and Hong Kong's prosperity and safety, the daily said.

     China has reiterated its ban on local governments using money raised by

special-purpose bonds to pay old debt and asked the money be invested into new

projects, according to a statement from a State Council meeting chaired by

Premier Li Keqiang. Local governments should tighten regulation over the use of

money and prohibit "white elephant" projects and they may also use the proceeds

for disaster relief, the statement said. 

     President Xi Jinping promised to deliver an improved business environment

for domestic and foreign companies and told international corporate CEOs they

made the right choice to stay in China, the official Xinhua News Agency reported

citing a letter to the CEOs. 

--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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