MNI China Daily Summary: Tuesday, July 2

     POLICY: China will further remove foreign ownership restrictions in

manufacturing and financial services and treat overseas and domestic companies

equally, Premier Li Keqiang said in Dalian today. China is confident that the

yuan exchange rate will remain broadly stable in the opening process and won't

engage in competitive devaluation of its currency, Li said.

     POLICY: China and U.S. reaching understanding at the G20 on bilateral trade

conflicts sends a positive signal to the domestic economy, Wang Bin, a deputy

director of market operations at the Ministry of Commerce, said in a briefing

today. Chinese businesses have become stronger dealing with the trade frictions,

including seeking access to other markets like the EU and Japan, and the overall

impact on trade and investment is manageable, Chu Shijia, the director of the

comprehensive department, said at the briefing. While there have been some

businesses moving out of China as a result of the year-long trade war, the scale

of the impact is not large, Chu said.

     POLICY: The outcome of the latest talks between presidents Xi Jinping and

Donald Trump were a "little better than expected" but some caution is still

required going forward, Yi Gang, Governor of the People's Bank of China (PBOC),

said in Helsinki on Monday. If trade continues under the current framework, it

will be easier for the U.S. and China to solve ongoing issues one by one, Yi

said. There will still be uncertainties, but a constructive roadmap was laid out

between the two leaders at the G20 in Osaka, the PBOC head continued.

     LIQUIDITY: The PBOC skipped open market operations (OMOs) for a seventh

straight day today, resulting in a net drain of CNY90 billion as the same amount

of reverse repos matured, according to Wind Information. Total liquidity in the

banking system is at a relatively high level, enough to offset the maturity of

reverse repos, according to the PBOC.

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

institutions (DR007) decreased to 1.9126% from Monday's close of 2.2140%,

according to Wind Information. The overnight repo average fell to 0.9017% from

1.0509% on Monday.

     YUAN: The yuan weakened to 6.8835 against the U.S. dollar from Monday's

close of 6.8444. The PBOC set the dollar-yuan central parity rate stronger at

6.8513 today, compared with 6.8716 set on Monday.

     STOCKS: The benchmark Shanghai Composite Index edged down 0.03% to close at

3,043.94. Hong Kong's Hang Seng Index increased 1.17% to 28,875.56.

     BONDS: The yield on the 10-year China Government Bond was last at 3.1700%,

down from Monday's close of 3.2225, according to Wind Information.

     FROM THE PRESS: China may expand the scale of local government special bond

issuance to tackle economic difficulties, the 21st Century Business Herald said.

The government is allowed to use the remaining balance from previous years,

totaling CNY1.13 trillion through the end of 2018, the newspaper reported,

citing Zhou Guannan, chief fixed-income analyst of Huachuang Securities. This is

higher than planned CNY2.15 trillion, the newspaper said.

     The resumption of China-U.S. talks must be based on equality and mutual

respect, Xinhua News Agency said in a commentary piece late Monday. The two

sides shall not hurt each other's right for development or sovereignty, Xinhua

added.

--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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