MNI China Daily Summary: Thursday, June 2

POLICY: China will accelerate the issuance of an estimated CNY3.65 trillion in local government special bonds by the end of June to boost infrastructure investment and help stabilise economic growth, said Ou Wenhan, Assistant Minister of Finance at a briefing on Thursday. Local governments should strive to use all such bonds by end-August, focusing on funding technology-based infrastructure and new energy projects, and prioritising mature projects to get work started quickly, according to Ou.

POLICY: China firmly opposes the U.S. using export controls as a tool of political suppression and economic bullying, and it will take necessary measures to safeguard the legitimate rights and interests of Chinese companies, said Gao Feng, spokesman of the Ministry of Commerce at a briefing.

LIQUIDITY: The People's Bank of China (PBOC) injected CNY10 billion via 7-day reverse repos with the rate unchanged at 2.1%. This keeps the liquidity unchanged after offsetting the maturity of CNY10 billion repos today, according to Wind Information. The operation aims to keep liquidity reasonable and ample, the PBOC said on its website.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) increased to 1.6274% from 1.5889% on Wednesday, Wind Information showed. The overnight repo average rose to 1.4233% from the previous 1.4077%.

YUAN: The currency strengthened to 6.6750 against the dollar from 6.6941 on Wednesday. The PBOC set the dollar-yuan central parity rate higher at 6.7095, compared with 6.6651 set on Wednesday.

BONDS: The yield on 10-year China Government Bond was last at 2.8050%, up from the previous close of 2.8000%, according to Wind Information.

STOCKS: The Shanghai Composite Index edged up 0.42% to 3,195.46, while the CSI300 index gained 0.16% to 4,089.57. Hang Seng Index fell 1.00% to 21,082.13.

FROM THE PRESS: China will increase financial support to boost infrastructure construction by adding a CNY800 billion credit quota for policy banks and matching funds with key projects, according to a statement on the government website citing a State Council executive meeting late Wednesday. The meeting chaired by Premier Li said that the newly added quota of CNY140 billion in tax rebates should be basically refunded by end-July, according to the statement. The State Council also urged officials to help unemployed migrant workers, and people whose jobs and income have been affected by the epidemic, the statement said.

The net outflows from the Chinese bond market may decelerate, likely less than CNY100 billion per month in May and June, as short-term investors have priced in the inversion of China-U.S. government-bond yield and yuan tend to stabilize in the coming months, Yicai.com reported citing Liu Linan, managing director of Deutsche Bank. The U.S. 10-year Treasury bond yield may rise to 3.3% in Q3 while that of 10-year China Government Bond may fluctuate between 2.7-3%, Liu was cited as saying. There is no need to worry about yuan, as it is traded at the midpoint of the fluctuation range in the past four years, reflecting rational market sentiment, Liu was cited as saying.

China plans to double its wind and solar power generation by 2025, with renewable energy generating about 3.3 trillion kWh annually, the Shanghai Securities News reported citing the 14th Five-Year Plan for Renewable Energy Development released Wednesday. Current available funds with low interest rates are far from enough, while the government is expected to further increase support for green bonds and green credits for eligible new energy projects, the newspaper said.