MNI China Daily Summary: Thursday, June 13

EXCLUSIVE: The People’s Bank of China is likely to sell some of its longer-term bond holdings to defuse a debt rally it sees as fuelling financial risk and to prompt more lending to the real economy, but China’s lack of creditworthy borrowers as its population ages and growth slows will continue to buoy safe assets over time, policy advisors and economists told MNI.

POLICY: Beijing will safeguard the interests of Chinese firms following the EU's decision to implement tariffs on Chinese imported battery electric vehicles, Ministry of Commerce He Yadong, spokesperson said Thursday.

LIQUIDITY: The PBOC conducted CNY2 billion via 7-day reverse repo on Thursday, with the rates unchanged at 1.80%. The operation has led to no change to liquidity after offsetting the CNY2 billion maturity today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) rose to 1.8146% from 1.7961% on Wednesday, Wind Information showed. The overnight repo average increased to 1.7323% from the previous 1.6848%.

YUAN: The currency strengthened to 7.2520 against the dollar, from 7.2537 at Wednesday's close. The PBOC set the dollar-yuan central parity rate lower at 7.1122, compared with 7.1133 set on Wednesday.

BONDS: The yield on 10-year China Government Bonds was last at 2.2750%, down from Wednesday's close of 2.2800%, according to Wind Information.

STOCKS: The Shanghai Composite Index fell 0.28% to 3,028.92, while the CSI300 index was decreased 0.51% to 3,526.13. The Hang Seng Index increased 0.97% to 18,112.63.

FROM THE PRESS: The China Chamber for Import and Export of Machinery is ready to defend the rights and interests of China's battery electric vehicle (BEV) firms, in reaction to the EU imposing up to 38.1% additional tariffs on the Chinese made automobiles. In a written statement, the chamber noted the European Commission had requested overly broad and stringent information during the investigation, which involved on-site inspections over several months. The chamber urged the EC to abide by WTO and EU anti-subsidy rules and jointly promote the integration of the China-EU automotive industry. (Source: Yicai)

City governments should select no more than two local SOEs as acquisition entities to buy up completed-but-unsold housing from developers for social housing programmes, and strictly avoid adding new implicit debts of local governments, said Zou Lan, director of the Monetary Policy Department at the People's Bank of China Wednesday. The selected SOEs must not be local government financing vehicles and meet the credit requirements of commercial banks. Loan funds obtained by SOEs must be accounted for separately and managed in a closed manner. Developers shall first repay the debts of projects with those sales revenue. (Source: 21st Century Business Herald)

The Chinese government has provided fiscal subsidies to the first batch of 15 cities for urban renewals, with projects including urban village renovation and the renewals of underground pipe and sewage networks accelerating, Economic Information Daily reported. The CNY1 trillion ultra-long-term special treasury bonds issued in May also include and fund some of the projects, the daily said. Meanwhile, some local governments have offered loan interest discounts to leverage more private capital to participate in urban renewals, the newspaper added.