MNI China Daily Summary: Thursday, May 16

EXCLUSIVE: The People’s Bank of China should increase its purchase of treasury bonds to support an expansionary fiscal stance, as the country struggles with insufficient demand which makes monetary easing measures grow less effective, a former PBOC advisor told MNI in an interview.

EXCLUSIVE: China’s long-term trade prospects, increased international competitiveness, and push into liquified natural gas vessels will help drive further sustainable growth in the country’s shipbuilding industry following a 95.4% y/y production increase over January and February and 31.3% y/y expansion to the total order book, an expert told MNI.

POLICY: Beijing will take necessary measures to defend its rights and interests following Washington's recent tariff increase on Chinese goods, Ministry of Commerce spokesperson He Yadong told a press conference when pressed by journalists on the potential for retaliation.

LIQUIDITY: The PBOC conducted CNY2 billion via 7-day reverse repo, with the rates unchanged at 1.80%, respectively. The operation has led to no change to the liquidity after offsetting the CNY2 billion maturity today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.8009% from 1.8087% on Wednesday, Wind Information showed. The overnight repo average increased to 1.7138% from the previous 1.7100%.

YUAN: The currency strengthened to 7.2188 against the dollar, from 7.2195 at Wednesday's close. The PBOC set the dollar-yuan central parity rate lower at 7.1020, compared with 7.1049 set on Wednesday.

BONDS: The yield on 10-year China Government Bonds was last at 2.3400%, up from Wednesday's close of 2.3195%, according to Wind Information.

STOCKS: The Shanghai Composite Index rose 0.08% to 3,122.40, while the CSI300 index was up 0.39% to 3,640.36. The Hang Seng Index increased 1.59% to 19,376.53.

FROM THE PRESS: China’s loan prime rate (LPR) should remain unchanged this month following the PBOC’s decision to hold MLF operations stable, analysts interviewed by Securities Daily have said. Wen Bin, chief economist at Minsheng Bank, said looking ahead authorities could use quantitative tools to promote moderate price increases and support the real economy, but in the short term will be unlikely to implement RRR and interest rate cuts given the need to stabilise the exchange rate and prevent idle funds. Wen noted the economy faces tighter liquidity in November/December given the low volume of maturing government bonds, and the PBOC may use RRR cuts to protect liquidity and ease MLF operational pressure.

Local governments have started to purchase developers’ unsold housing stocks with Lin’an district in Hangzhou city of Eastern China planning to acquire no more than 10,000 square meters of commercial housing for a public rental programme, Quanshang China reported. The government said on Wednesday that the acquisition is aimed at existing houses or those eligible for delivery within one year. The basic acquisition unit should be an entire building with the area of a single unit not exceeding 70 square meters. The maximum acquiring price shall not exceed the assessed price of surrounding houses.

The China Securities Regulatory Commission will further consolidate the institutional foundation for investor protection and further promote the improvement of the quality of listed companies and professional services by institutions, said CSRC Chairman Wu Qing. The commission will also further crack down on securities crimes and unblock investors' relief channels. (Source: Shanghai Securities News)