MNI China Daily Summary: Thursday, June 28

     TOP NEWS: The People's Bank of China (PBOC) would like an overall weaker

yuan to buffer against a China-U.S. trade conflict affecting exports, Zhang

Ming, senior fellow at the Institute of World Economics and Politics under the

Chinese Academy of Social Sciences, told MNI in an exclusive interview. However,

the PBOC may step in if USDCNY rallies above 6.7 against dollar. The currency

will remain in a narrow 6.5 to 6.7 range in the second half of this year, Zhang

said.

     TOP NEWS: The U.S. argument that China has evaded U.S. and global

technological development is false, and U.S. is ignoring the fact that

cooperation between Chinese and U.S. tech companies would be a win for both

sides, said the China Ministry of Commerce on Thursday. The U.S. threat to

restrict Chinese tech investment and limit related exports to Chinese companies

is contrary to its goal to cut trade deficit, said Gao Feng, spokesman of

MOFCOM, at the weekly press briefing. China is ready to integrate various

measures to counter U.S. tariff action on China, said Gao.

     YUAN: The yuan has now regained half of the drop seen from the January 2017

high. However, given the dollar's strength has been broad-based this year, the

yuan has not seen a major drop in its real effective exchange rate. The PBOC

likely favours a weaker yuan as a means of improving competitiveness, but will

be mindful of the impact on confidence of a continued collapse.

     POLICY: China will accelerate the establishment of free-trade zones in

order to promote free trade and attract foreign investors, the State Council

said on Thursday. This is part of the measures the Chinese government iterated

during a press conference particularly set to reinforce China's stance to firmly

support trade multilateralism and opening up to the rest of the world. China

will continue to align its trade rules with international trade principles,

reduce tariffs and fees for foreign investors, and enhance policy transparency,

said the council. China will also further strengthen protection for intellectual

property, the council remarked.

     LIQUIDITY: The PBOC injected CNY80 billion via its 7-day reverse repos on

Thursday, resulting in a net drain of CNY100 billion as a total of CNY180

billion reverse repos matured today, according to a statement on the PBOC

website. CFETS-ICAP's money-market sentiment index closed at 34 on Wednesday,

down from 36 on Tuesday.

     MONEY MARKET RATES: Benchmark 7-day deposit repo average fell to 2.8493% on

Thursday from 2.8659% on Wednesday; overnight average decreased to 2.2090% from

2.3366% on Wednesday: Wind Information.

     YUAN: The yuan weakened to 6.6177 against the U.S. dollar on Thursday from

Wednesday's 6.5950 closing, following today's weaker fixing. The PBOC set the

yuan central parity rate at 6.5960, weaker than Thursday's 6.5569. The central

bank has set the fixing weaker for the seventh consecutive day, taking the

currency to its lowest level since December 20, 2017. 

     BONDS: The yield on benchmark 10-year China Government Bond remained

unchanged from the previous close of 3.2600%, according to Wind Information.

     STOCKS: Shares in Shanghai continue to decline for the fourth consecutive

day this week, led by liquor stocks. Shanghai Composite Index closed 0.93% lower

at 2786.90, making it the lowest in the past two years. Hong Kong's Hang Seng

Index fell 0.23% to 28291.37.

     FROM THE PRESS: Policies that monetise shantytown renovation should

gradually fade out as real estate de-stocking is completed, said Yin Zhongli,

director of real estate research in the Chinese Academy of Social Science, in a

commentary in 21st Century Business Herald. Subsidies given to shantytown

residents stimulated the real estate market when it was implemented in 2014.

However, the excessive growth of housing prices in third- and fourth-tier cities

reveals the negative impact of the de-stocking policy, Yin said. Increasing land

reserves outweigh the outflow of population in third- and fourth-tier cities,

Yin added.

     Domestic demand will dominate the trend of China's economy in the second

half of the year, reported China Securities Journal, citing experts. Service

products accounted for a larger portion of overall expenditure in May, noted

Zhang Ming, chief economist of Ping An Securities, according to the Journal.

Infrastructure investment is likely to bottom out with the support of local

government bonds and increasing fiscal expenditure in the third quarter, said

Bian Quanshui, chief analyst of Sinolink Securities. Manufacturing will be an

important pillar of fixed asset investment as the accumulated growth of

manufacturing investment reached 5.2% from the January to May period, with a

year-to-year growth of 0.4%, said Lu Zhengwei, chief economist of Industrial

Bank, according to the Journal.

     The National Development and Reform Commission (NDRC) will regulate foreign

debt taken by real estate enterprises for domestic investment, reported Shanghai

Securities News. NDRC will standardize relative requirements for corporate debt

and fund uses to prevent foreign debt risks, said an anonymous manager of NDRC,

according to the newspaper. NDRC will control the total quantity of foreign debt

and then improve its structure, noted the manager, according to the newspaper.

--MNI Beijing Bureau; +86 (10) 8532-5998; email: sherry.qin@marketnews.com

--MNI Beijing Bureau; +86 (10) 8532 5998; email: marissa.wang@marketnews.com

--MNI Beijing Bureau; +86-10-8532-5998; email: beijing@marketnews.com

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