MNI China Daily Summary: Tuesday, June 2

     POLICY: China should keep agreements reached under the Phase One trade deal

with the U.S., including purchases of U.S. soybeans at reasonable prices, said

Wang Jisi, an expert on China-U.S. relations at Peking University and a former

advisor at the Ministry of Foreign Affairs. Other business ties should be

maintained, such as buying Boeing planes, Apple iPhones and keeping U.S.

franchise operations in China, Wang wrote in a commentary published by the

Global Times on Tuesday.

     POLICY: China May auto sales rose 3.2% from April to 2.14 million, an

increase of 11.7% from a year ago, according to data from China Automobile

Association. Sales in the first five month still declined 23.1% to 7.9 million,

the group said.

     LIQUIDITY: The People's Bank of China (PBOC) skipped open market operations

on Tuesday, resulting in a net drain of CNY10 billion given the same amount of

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

the banking system is reasonable and ample, the PBOC said on its website.

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

institutions (DR007) decreased to 1.5062% from Monday's close 1.7051%, Wind

Information showed. Overnight repo average declined to 1.4811% from 1.5926%

yesterday. 

     YUAN: The yuan strengthened to 7.1105 against the dollar from Monday's

close 7.1340. PBOC set the dollar-yuan central parity rate lower at 7.1167,

compared with the 7.1315 set on Monday.

     BONDS: The yield on 10-year China Government Bonds was last at 2.7850%, up

from Monday's close of 2.7150%, according to Wind Information.

     STOCKS: The Shanghai Composite Index increased 0.2% to 2921.40. Hong Kong's

Hang Seng Index gained 1.11% to 23995.94. 

     FROM THE PRESS: U.S. moves to revoke Hong Kong's special status will

irreversibly damage the business interests of U.S. companies with investments in

Hong Kong, according to Global Times. The Trump administration may decide

against rash moves over Hong Kong as it looks to secure support in the upcoming

election, the newspaper said citing Sun Chenghao, an assistant research

professor at the China Institute of Contemporary International Relations.

     The Chinese yuan will get back to around 7 against the U.S. dollar in the

medium-term, and PBOC may use countercyclical tools to guide expectations in the

forex market, the China Securities Journal reported citing Zhang Jiqiang, an

analyst with Huatai Securities. The recent depreciation of the yuan was due to

negative market sentiment and the economy is recovering well, the journal said. 

     China published a plan to build Hainan Province, an island off the southern

coast, into a free trade port, according to China.com.cn. The plan promises to

build a custom mechanism featuring no tariffs and significantly relax market and

investment access for foreign companies, the government portal 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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