MNI China Daily Summary: Tuesday, May 31

DATA: The China Purchasing Managers' Index (PMI) rose to 49.6 in May from April's 47.4, rebounding to a three-month high after April's two-year low, as Covid-hit areas gradually resume work and production, data from the National Bureau of Statistics on Tuesday showed. The non-manufacturing PMI increased by 5.9 points to 47.8, as service activities rapidly recovered amid a steady decline of Covid-19 cases nationwide.

POLICY: China will kick off a fresh promotional drive for new energy vehicles in rural areas, which will be followed by a push on home appliances and green building materials, all looking to boost spending on big-ticket items and help stabilize the economy, Vice Minister of Industry and Information Technology Xu Xiaolan told a press 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) rose to 1.8406% from the close of 1.7894% on Monday, Wind Information showed. The overnight repo average increased to 1.5684% from the previous 1.3939%.

YUAN: The currency strengthened to 6.6578 against the dollar from Monday's close of 6.6648. The PBOC set the dollar-yuan central parity rate lower at 6.6607, compared with 6.7048 set on Monday.

BONDS: The yield on 10-year China Government Bonds was last at 2.7940%, up from Monday's close of 2.7700%, according to Wind Information.

STOCKS: The Shanghai Composite Index gained 1.19% to 3,186.43, while the CSI300 index rose 1.55% to 4,091.52. The Hong Kong's Hang Seng Index rallied 1.38% to 21,415.20.

FROM THE PRESS: China will accelerate the issuance and use of local government special bonds to promote investment and stabilise economic growth, ensuring that all CNY3.65 trillion in new special bonds this year are sold by end-June and basically used by end-August, according to a statement on the Ministry of Finance website, citing a meeting chaired by Finance Minister Liu Kun. As of May 27, a total of CNY1.85 trillion of new special bonds had been issued, an increase of CNY1.36 trillion over the same period last year, the statement said. China will increase value-added tax refunds and review to include more industries, and quicken fiscal spending, the statement said.

Housing markets in May have seen a marginal increase in sales but any significant recovery will require an easing on pandemic curbs and more policy support with buyers still hesitant, the 21st Century Business Herald reported. Home sales in 17 major cities monitored by the China Index Academy rose 8.8% m/m in May, among which that in second-tier and third-tier cities increased by 8.31% and 27.2%, respectively, the newspaper said. There may be a further sales increase after the Dragon Boat Festival holiday in early June, the newspaper said citing an unnamed real estate salesperson.

Foreign companies are still reluctant to miss the business opportunities in China despite the impact of domestic Covid-19 outbreaks, and continue to increase investments, the Beijing Business Today reported. Just over 87% of interviewed foreign-funded companies maintained or expanded their business scale in Q1, and 72% of them increased investment by more than 5%, the newspaper said citing a report by China Council for the Promotion of International Trade released Monday.