MNI China Daily Summary: Thursday, June 18

     BEIJING (MNI) - TOP NEWS: Financial policies dealing with the Covid-19

pandemic shall be appropriate in amount, without causing moral hazard and be

withdrawn when no longer necessary, leaving space for future policy manoeuvres,

Yi Gang, China's central bank Governor said today. The People's Bank of China

(PBOC) will maintain ample liquidity in the second half of the year, helping

boost new yuan loans by nearly CNY20 trillion and total social financing to over

CNY30 trillion, Yi said at the Lujiazui Forum held online.

     POLICY: China will push the financial industry to sacrifice CNY1.5 trillion

in profits this year to support businesses through a variety of policy measures,

according to a statement on the State Council website. The statement, which

followed an executive meeting late Wednesday, said the measures would include

guiding bond interest rates lower, issuing cheaper loans, deterring loan

repayments for SMEs, and granting more unsecured loans to small companies and

cutting fees. The PBOC should also use reserve requirement ratio cuts and

relending tools to maintain ample liquidity and ease corporate funding

pressures, the statement read.

     POLICY: Increased food and agricultural product imports remains an

important part of China's trade policy, despite some reports suggesting imported

salmon was contaminated with the Covid-19 virus, a government official

spokesperson said today. "China will strengthen communication with relevant

countries, control the quality of imported food and ensure the health and safety

of Chinese consumers," Gao Feng, a spokesman for the Ministry of Commerce told

the press at a regular briefing. Gao didn't directly answer if China may

temporarily suspend imports of meat and seafood transported by refrigerated

means.

     POLICY: China may have difficulty meeting the mandated imports from the

U.S. under the Phase One trade deal given the Covid-19 pandemic, though the

issue should not affect the deal and Sino-U.S. relationship, said Zhu Min, a

former PBOC official and now head of the National Financial Research Institute

at Tsinghua University.

     DATA: Foreign direct investment (FDI) into China totalled $9.87 billion in

May, a rise of 4.2% y/y, compared the $10.14 billion inflow for April, the

Ministry of Commerce said today. FDI into China for the first five months

totalled $51.21 billion, falling 6.2% y/y.

     LIQUIDITY: The PBOC lowered the 14-day reverse repo rate to 2.35% from

2.55%, according to a statement on its website. This was the first cut to the

14-day interbank rate since a 10 bps cut on Feb. 3, 2020, according to data from

Wind Information. The PBOC injected CNY70 billion via 14-day reverse repos as

well as CNY50 billion via 7-day reverse repos with the rate unchanged at 2.2%.

This resulted in a net injection of CNY40 billion given the maturity of CNY80

billion today, according to Wind Information. The operations seek to maintain

stable liquidity at mid-year, the PBOC said on its website.

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

institutions (DR007) increased to 2.0884% from Wednesday's close 2.0453%, data

by Wind Information showed. The overnight repo average rose to 2.1146% from the

previous 2.0548%.

     YUAN: The currency strengthened to 7.0812 against the dollar from

Wednesday's 7.0859 close. PBOC set the dollar-yuan central parity rate higher at

7.0903, compared with the 7.0873 set on Wednesday.

     BONDS: The yield on 10-year China Government Bonds was last at 2.8700%,

down from Wednesday's close of 2.8950%, according to Wind Information.

     STOCKS: The Shanghai Composite Index edged up 0.12% to 2,939.32. Hong

Kong's Hang Seng Index lost 0.07% to 24,464.94.

     FROM THE PRESS: China's senior diplomat Yang Jiechi met U.S. Secretary of

State Mike Pompeo in Hawaii on Tuesday and Wednesday, according to the People's

Daily. The two parties fully expressed their positions, the state media said,

describing the dialogue as "constructive". The officials agreed to take action

to implement the consensus reached by their respective presidents and maintain

communication and contacts, the newspaper said.

     The resurgence of the coronavirus in Beijing was discovered early and is

still on the rise, China Central Television reported citing Pang Xinghuo, deputy

director of the Beijing Centre for Disease Control and Prevention. The number of

new cases may continue to grow given that the Xinfadi market is the largest

wholesale food market in Beijing with high traffic volume and an extensive

logistic networks. The infection was caused by interpersonal transmission or the

contamination of goods, Pang said. 

     China demanded India for a thorough investigation into the recent border

incident and severely punish those held accountable, Foreign Minister Wang Yi

said in a telephone call late Wednesday with Indian External Affairs Minister S.

Jaishankar, according to a statement on the ministry's website. Wang said Indian

frontline border troops broke the consensus reached at commander-level talks

between the two sides. India must not misjudge the current situation or

underestimate China's firm will to safeguard its territorial sovereignty, Wang

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

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