MNI China Daily Summary: Thursday, June 20

     EXCLUSIVE: Chinese government advisors told MNI they expect President

Donald Trump to eventually make concessions in trade talks for domestic

political reasons, but said his G20 meeting with China's Xi Jinping is unlikely

to produce much beyond a resumption of stalled formal negotiations. Trump is

unlikely to go ahead with his threat to impose additional tariffs on $300

billion in Chinese imports ranging from mobile phones to clothing, as the U.S.

economy and stock market would be hit hard, said Wang Haifeng, director of

International Trade and Investment at the Chinese Academy of Macroeconomic

Research, run by the National Development and Reform Commission (NDRC). Mei

Guanqun, deputy researcher at the China Center for International Economic

Exchange, agreed, explaining that Trump would seek a deal to further his 2020

bid for re-election.

     TRADE: China's principles, position and attitude on negotiations with the

U.S. on the trade conflicts are consistent and clear, Gao Feng, the spokesman of

the Ministry of Commerce, said in a regular briefing today. Gao made the remark

when questioned whether China will stick to its demand made when the trade talks

broke down, including that the U.S. must remove all added tariffs. "China's core

concern must be addressed," Gao said.

     LIQUIDITY: The People's Bank of China (PBOC) injected CNY30 billion via

14-day reverse repos, resulting in a net injection of CNY30 billion as no

reverse repos matured, according to Wind Information. The injection aims at

stabilizing liquidity conditions through midyear, the PBOC said. The reverse

repo rate was kept unchanged at 2.70%, according to the PBOC's OMO trading

announcement.

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

institutions (DR007) rose to 2.2868% from Wednesday's close of 2.2151%, Wind

Information showed. The overnight repo average decreased to 1.2301% from

Wednesday's 1.4229%.

     YUAN: The yuan strengthened to 6.8505 against the dollar from Wednesday's

close of 6.9040. The PBOC set the dollar-yuan central parity rate stronger for a

second day at 6.8805, compared with 6.8893 set on Wednesday.

     BONDS: The yield on 10-year China Government Bond was last at 3.2475%, down

from the close of 3.2600 on Wednesday, according to Wind Information.

     STOCKS: The benchmark Shanghai Composite Index increased 2.38% to 2,987.12.

Hong Kong's Hang Seng Index rose 1.23% to 28,550.43.

     FROM THE PRESS: China may consider expanding 2019 local government special

bond issuance from the original CNY2.15 trillion, the Shanghai Securities News

said today, citing Zhang Yiqun, a researcher at the Society of Public Finance.

Zhang said there is room for an additional CNY1 trillion, given that total

government debt is not high, and the debt risk is generally controllable. Any

quota expansion would aim to further boost infrastructure investment, as

investment growth, expected to be a key economic driver, has been

underperforming, the paper said.

     Stable liquidity conditions are expected at the beginning of Q3, given the

PBOC has maintained net injections of cross-quarter funds via open market

operations, China Securities Journal said today. The newspaper noted that small

and medium-sized non-bank financial institutions are undergoing liquidity

pressure despite ample total liquidity, as financial institutions are alert to

interbank credit risks, blocking the flow of liquidity, the newspaper noted.

     China must stand its ground and resist U.S. pressure as the trade war is

highly likely to continue, with plenty of twists and turns in the China-U.S.

talks, the Global Times said in a commentary late Wednesday. The paper noted

that the yuan exchange rate has not weakened below the key psychological seven

level against the U.S. dollar as some had expected, proving China has enough

stamina for a strategic game with the U.S.

--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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