MNI China Daily Summary: Tuesday, June 18

     POLICY: China will further expand the Belt and Road Initiative to Western

Europe, North and Latin Americas in the next phase, Xiao Weiming, a department

director at the Office of the Leading Group for Promoting the Belt and Road

Initiative, said at an event in Beijing hosted by the China Center for

International Economic Exchanges today. China will further promote the

construction of high-quality and sustainable infrastructure in OBOR countries

such as railway, highway, airports and seaports, Xiao said.

     DATA: The average price of new homes in 70 major cities, excluding

subsidized units, increased 11.3% y/y in May, slower than the 11.4% growth the

previous month, according to data released by China's National Bureau of

Statistics. On a m/m basis, the average price was up 0.7% in May, faster than

the 0.6% growth reported in April.

     LIQUIDITY: The People's Bank of China (PBOC) injected CNY90 billion via

14-day reverse repos, resulting in a net injection of CNY80 billion after CNY10

billion of reverse repos matured today, according to Wind Information. The

injection aims to offset the impact of the tax season and local government bond

issuance and stabilize the liquidity conditions at midyear, the PBOC said. The

reverse repo rate was kept unchanged at 2.70%, according to PBOC's OMO trading

announcement.

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

institutions (DR007) decreased to 1.9000% from Monday's close of 2.3494%,

according to Wind Information. The overnight repo average fell to 1.5800% from

1.7775% on Monday.

     YUAN: The yuan weakened to 6.9264 against the U.S. dollar from Monday's

close of 6.9254. The PBOC set the dollar-yuan central parity rate higher for a

sixth trading day at 6.8942, compared with 6.8940 set on Monday.

     STOCKS: The benchmark Shanghai Composite Index rose 0.09% to close at

2,890.16. Hong Kong's Hang Seng Index increased 1% to 27,498.77.

     BONDS: The yield on the 10-year China Government Bond was last at 3.2450%,

up from Monday's close of 3.2400, according to Wind Information.

     FROM THE PRESS: China is prepared for a protracted trade war with the U.S.,

Global Times said in a commentary late Monday. The newspaper described the trade

war as a battle against China's human rights and an act of hegemony by the U.S.,

but said that regardless of Washington's actions, the prosperity of the Chinese

people would continue to increase. The newspaper said that even if a trade deal

is agreed on, China is preparing for long-term pressure from the U.S.

     The PBOC is unlikely to lower interest rates even if the U.S. Federal

Reserve cuts rates this year, said China Securities Journal in a commentary

today. If the PBOC follows the Fed to cut rates, it may not boost the real

economy but rather increase the risk of asset price inflation, the newspaper

warned. China should maintain monetary policy independence because its economic

fundamentals are not synchronized with the U.S., the commentary added.

     With limited room for more reserve requirement ratio (RRR) cuts, the PBOC

may have to consider other monetary policy measures, according to an article in

the 21st Century Business Herald today. The Herald said the PBOC could consider

boosting M2 growth through open market operations or via pledged supplementary

lending (PSL) and medium-term lending facility (MLF). M2 growth failed to

rebound in May, recording a slower rise of 8.5% y/y, and also faces downward

pressure from the slowdown in credit expected in the second half of the year,

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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