MNI China Daily Summary: Thursday, June 6

     POLICY: China will make no concession on major matters of principle and

Washington must make a sincere gesture and correct its wrongdoings should it

wish to resume trade negotiations, Gao Feng, the spokesman of the Ministry of

Commerce (MOFCOM) said in a briefing today. "The future development of the trade

negotiation depends on the U.S.," said Gao. "China will keep an eye on how the

U.S. acts," he said. Gao spoke on the same day when the ministry released a

report on how the U.S. benefited from trading with China, which according to Gao

is to use data and facts to refute U.S. claims of suffering losses in trading.

"Even though China enjoys the trade surplus, both countries have shared the

gains," Gao said.

     LIQUIDITY: The People's Bank of China (PBOC) injected CNY10 billion via

7-day reverse repos today, adding liquidity for the fourth day. This resulted in

a net drain of CNY20 billion given that CNY30 billion of reverse repos matured

today, according to Wind Information. 

     The PBOC also injected a total of CNY500 billion of medium-term lending

facility (MLF), so as to offset the maturity of CNY463 billion of MLF today. The

injections aim to offset the impact of MLF and reverse repos maturing, as well

as government bond issuance, the PBOC said.

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

institutions (DR007) rose to 2.5800% from Wednesday's close of 2.4463%, Wind

Information showed. The overnight repo average increased to 1.7000% from

Wednesday's 1.5809%.

     YUAN: The yuan weakened to 6.9161 against the dollar from Wednesday's close

of 6.9088. The PBOC set the dollar-yuan central parity rate higher for a second

day at 6.8945 today, compared with Wednesday's 6.8903.

     BONDS: The yield on 10-year China Government Bond was last at 3.2400%, up

from the close of 3.2200 on Wednesday, according to Wind Information.

     STOCKS: The benchmark Shanghai Composite Index fell 1.17% to 2827.80. Hong

Kong's Hang Seng Index increased 0.26% to 26,965.28.

     FROM THE PRESS: Chinese authorities should be more tolerant of the

non-performing loans taken out by small and micro-sized enterprises, according

to an executive meeting of the State Council. Small companies' NPL rates should

be relaxed from the previous requirement of not more than 2 percentage points

higher than the general NPL rate, to 3 pps, the government said on its website.

The relaxation is aimed as a guide to banks to lower actual interest rates and

financing costs for small companies, it said.

     The PBOC is committed to providing timely support to small and medium-sized

banks with temporary liquidity issues, according to a statement on the central

bank's website published late Wednesday. The statement, issued by the PBOC's

Shanghai head office, appeals for calm in the market after its seizure of the

small lender Baoshang Bank. The PBOC called this a special case and that overall

small and medium-sized bank sector is healthy with enough liquidity.

     A new list of banned areas for foreign investment will be released by the

end of this month, according to a report from Xinhua News Agency citing Ning

Jizhe, deputy chairman of the National Development and Reform Commission. The

government will remove all restrictions on foreign investors, except for areas

on the banned list, and will treat domestic and foreign companies equally,

Xinhua said citing Ning.

--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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