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MNI China Daily Summary: Tuesday, June 6
POLICY: Fitch Ratings has revised its outlook for China's steel sector to neutral from negative, citing expectations the government will maintain strong construction activity in H2, driven by high use of infrastructure linked special-purpose bonds.
LIQUIDITY: The People's Bank of China (PBOC) conducted CNY2 billion via 7-day reverse repos, with the rates unchanged at 2.00%. The operation has led to a net drain of CNY35 billion after offsetting the maturity of CNY37 billion reverse repo today, according to Wind Information. The operation aims to keep banking system 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 1.7499% from 1.7950%, Wind Information showed. The overnight repo average increased to 1.2775% from 1.2311%.
YUAN: The currency strengthened to 7.1174 against the dollar from 7.1185. The PBOC set the dollar-yuan central parity rate higher at 7.1075, compared with 7.0904 set on Monday.
BONDS: The yield on 10-year China Government Bonds was last at 2.7490%, down from Monday's close of 2.7575, according to Wind Information.
STOCKS: The Shanghai Composite Index edged down 1.15% to 3,195.34, while the CSI300 fell 0.94% to 3,808.16. The Hang Seng Index was down 0.05% to 19,099.28.
FROM THE PRESS: China’s macro leverage in Q1 reached 281.8%, up from 273.2% in the previous quarter, according to the China Economic Daily. Looking forward, policy makers will stabilise macro leverage through policy support, deepening reform and opening up, the paper said. One expert noted Q1's increase was caused by a slowdown in nominal economic growth, and banks' usual new loan increases at the start of the year. The Government has front-loaded local government bond issuance in Q1 and expanded the central fiscal deficit, which has resulted in the macro leverage increasing, another expert said. (Source: China Economic Daily)
China will introduce measures to unify its domestic market as it seeks high quality development, the State Council announced. At a recent meeting, State Council leaders said they will deepen reforms to improve market access and fair competition, as well as dismantle invisible local barriers and monopolies. The meeting was attended by Li Chunlin, deputy director at the National Development and Reform Commission (NDRC). He said the unified market would improve efficiency of resource allocation and release market potential. (Source: 21st Century Herald)
China’s fiscal revenue should expand this year but factors such as long-term epidemic impacts and tax reduction policies bring uncertainty, according to Wang Zecai, a researcher at the Chinese Academy of Fiscal Sciences. A Ministry of Finance spokesperson said local government debt risks were distributed unevenly, but the overall financial situation remained healthy. In future, local governments will benefit from the economic recovery, self-help reforms and national support. (Source: Yicai)
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