MNI China Daily Summary: Tuesday, July 14

     POLICY: China is honouring its Phase One trade agreement inked with the

U.S. even as its imports declined in H1 due to the pandemic, Li Kuiwen, a

spokesman for the General Administration of Customs, said at a briefing Tuesday.

China is keeping promises to expand imports and hopes the two nations stick to

the agreement and overcome any problems, Li said. Even during the depths of the

pandemic, the decline in imports from the U.S. was still less severe than seen

for overall imports, he said.

     LIQUIDITY: The PBOC injected CNY30 billion via 7-day reverse repos with

rates unchanged at 2.2% and no reverse repos matured today, according to Wind

Information. The operations aim to maintain the liquidity in banking system at a

reasonable and ample level, the PBOC said on its website.

     DATA: Exports edged up 0.5% y/y to $213.57 billion in June, recovering from

the 3.3% y/y decline last month. June imports rose for the first time this year

by 2.7% y/y to $167.15 billion, compared with last month's 16.7% decline. For

H1, China's imports fell 7.1% y/y and exports declined 6.2% y/y.

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

institutions (DR007) fell to 2.1023% from Monday's close of 2.1931%, Wind

Information showed. The overnight repo average declined to 1.6643% from the

previous 2.0950%.

     YUAN: The currency weakened to 7.0188 against the dollar from 7.0031 on

Monday. PBOC set the dollar-yuan central parity rate higher at 6.9996, compared

with the 6.9965 for Monday.

     BONDS: The yield on 10-year China Government Bond was last at 3.0200%, down

from the close of 3.0550% on Monday, according to Wind Information. 

     STOCKS: The Shanghai Composite Index fell 0.83% to 3,414.62. Hang Seng

Index dropped 1.14% to 25477.89.

     FROM THE PRESS: Policymakers should lower expectations for further interest

rate cuts in H2 to prevent financial resources from being used in speculative

trading, the Economic Information Daily reported citing Dong Ximiao, a

researcher with the National Institution for Finance and Development. Amid the

central government's call for forgoing bank profits to help the real economy,

asset quality and capital of regional banks may deteriorate, so the banks should

be cautious about increasing the scale of their assets this year, Dong was

reported as saying.

     Banks across China have been checking if their clients invested borrowed

money in the stock market responding to regulators' call to ban illegal

off-floor financing, the 21st Century Business Herald reported citing bank

sources. Clients targeted include both companies and individuals, and some have

asked individuals to provide extra documentation to show the usage of loans, yet

companies could evade regulations through connected transactions, the newspaper

said.

     The government should tighten the housing market as rapidly rising house

prices in some cities risk creating herd behaviours, Economic Daily said in a

commentary. The fast rise in house prices will lure companies to invest in real

estate rather than in the real economy, jeopardizing employment, the Daily said.

The government should step up financial monitoring and other measures to keep

real estate speculation under control, it said.

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

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

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