MNI China Daily Summary: Tuesday, July 16

     POLICY: China will continue to accelerate the issuances of local government

bonds (LGB) and implement tax-cut policies to boost growth in the second half,

the Ministry of Finance said in a briefing today. The finance ministry will

further push local governments to make good use of funds from selling bonds to

support investment in important sectors and encourage the participation of

private investment. Local governments issued CNY2.18 trillion bonds in H1,

meeting 70.7% of the quota for the whole year. Issuances reached CNY717 billion

in June, the largest for a single month in H1. 

     LIQUIDITY: The People's Bank of China (PBOC) injected CNY160 billion via

7-day reverse repos today, adding liquidity for the first time after 16

consecutive days of no interventions. This results in a net injection of CNY160

billion as no reverse repos matured, according to Wind Information. The

injection aims to offset the impact of tax season, the PBOC said. The reverse

repo rate was unchanged from the previous day at 2.55%, according to the PBOC's

OMO trading announcement.

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

institutions (DR007) rose to 2.7337% from Monday's close of 2.6633%, Wind

Information showed. The overnight repo average increased to 2.7334% from

Monday's 2.6165%.

     YUAN: The yuan weakened to 6.8772 from Monday's close of 6.8758. The PBOC

set the dollar-yuan central parity rate weaker at 6.8710, compared with 6.8677

on Monday. 

     YUAN: China should actively and steadily promote the internationalization

of the yuan, boost overseas investors' confidence in holding and using it, as

well as prevent risks amid the opening-up, Pan Gongsheng, deputy governor of the

PBOC and director of the State Administration of Foreign Exchange, wrote in a

PBOC-owned magazine China Finance today. The internationalization of the yuan

should be market-driven, and the PBOC should gradually expand the currency's

role in cross-border investment, financial market transactions and reserves, and

continue to liberalize interest rates and reform the foreign exchange market,

said Pan. The PBOC should also guide the healthy development of the offshore

yuan market and improve macro-prudential management, Pan said.

     BONDS: The yield on the 10-year China Government Bond was last at 3.1775%,

decreased from Monday's close of 3.1780% , according to Wind Information.

     STOCKS: The benchmark Shanghai Composite Index fell 0.16% to 2,937.62. Hong

Kong's Hang Seng Index rose 0.23% to 2,8619.62.

     FROM THE PRESS: The U.S. is oblivious to China's economic resilience and

exaggerates China's slowdown to offset its own anxieties about the ongoing trade

war, the Global Times said in an editorial. China's GDP remained above 6%, even

though the trade conflict has stretched for over a year, the newspaper said. It

is China's economic structural adjustment that slowed growth slightly, not U.S.

tariffs as claimed by President Donald Trump, the newspaper said.

     China's better-than-expected June economic data showed the resilience of

its economy, and will be an argument for keeping policy unchanged, the China

Securities Journal said. The market shouldn't overly anticipate a further

loosening of monetary policy and the extremely abundant liquidity in recent

weeks may be difficult to sustain, the journal said in a commentary today. The

PBOC is likely to inject liquidity this month due to maturing medium-term

lending facility (MLF) in late July, the newspaper added.

     The housing market in China's first and second-tier cities is expected to

cool in Q3 in the absence of further credit easing policy, the Economic

Information Daily reported citing Zhang Dawei, the chief analyst of Centaline

Property. Property investment may continue to slow in H2 due to the lack of

capital by developers and the weak sales of commercial housing, the newspaper

said.

--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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