MNI China Daily Summary: Tuesday, July 21

     EXCLUSIVE: The U.S. and China should set up a special communication

mechanism before the U.S. presidential election in order to prevent "unexpected

incidents" because existing channels have been disrupted as bilateral relations

hit their lowest ebb since 1979, China's former Vice Finance Minister Zhu

Guangyao told MNI. On the domestic economy, Zhu said China's GDP should grow by

more than 3% in 2020 as the Covid-19 pandemic recedes within the country, but

officials are increasingly wary of the danger of an uneven "K-shaped" recovery

with different sectors outpacing others both at home and abroad.

     POLICY: China has told the UK to stop interfering in Hong Kong's affairs or

face the consequences after London on Monday suspended an extradition treaty

with Hong Kong and implemented an arms embargo. "China urges the UK not to go

further down the wrong path, otherwise it will suffer the consequences," said an

unnamed spokesperson at the Chinese Embassy in the UK, according to China's

government-run portal China.com.cn.

     LIQUIDITY: The People's Bank of China (PBOC) injected CNY10 billion via

7-day reverse repos with the rate unchanged. This resulted in a net drain of

CNY20 billion given the maturity of CNY30 billion of reverse repos, 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) decreased to 2.0846% from 2.1523% on Monday, Wind

Information showed. The overnight repo average fell to 1.5514% from 1.9341%.

     YUAN: The yuan weakened to 6.9936 against the dollar from 6.9912 on Monday.

PBOC set the dollar-yuan central parity rate lower for a second day at 6.9862,

compared with the 6.9928 set on Monday.

     BONDS: The yield on 10-year China Government Bonds was last at 2.9100%,

down from the close of 2.9200% on Monday, according to Wind Information.

     STOCKS: The Shanghai Composite Index rose for the fourth trading day by

0.20% to 3,320.89. Hong Kong's Hang Seng Index rallied 2.31% to 25,635.66.

     FROM THE PRESS: The market expects the PBOC to cut the interest rate on the

medium-term lending facility (MLF) in Q3 to support recovery that began in Q2

and promote lower borrowing costs for businesses, the 21st Century Business

Herald reported citing Wang Qing, chief analyst with Golden Credit Ratings. The

PBOC leaving LPR unchanged yesterday was expected given MLF rate has been stable

and that banks' face rising marginal costs, the newspaper said citing Wen Bin,

chief researcher at China Minsheng Bank.

     China's economic policies should focus on effectively expanding domestic

demand, particularly consumer spending, in the second half by stabilizing

employment, increasing subsidies to low-income families and accelerating the

reopening of hotels and restaurants, malls, entertainment and tourism, the

Economic Information Daily reported citing Wang Yiming, a former deputy director

of the Development Research Centre of the State Council. Annual growth could

reach about 3% this year, Wang was reported saying.

     China recorded box office sales over CNY3 million yesterday after cinemas

reopened for the first time in six months, compared CNY248 million on the same

day a year ago, the Securities Daily reported. Movie theatre sales may recover

to only 20-30% of normal levels in August and September due to continued social

distancing rules, and may return to normal in October, the newspaper reported

citing HuaAn Securities.

--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

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

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