MNI China Daily Summary: Wednesday, July 10

     DATA: China faces renewed deflation risks, as producer prices in June

posted no increase from last year. Consumer price index held steady as declining

energy prices largely offset rising food prices. CPI remained at 2.7% y/y in

June, unchanged from May's 15-month high, data released by the National Bureau

of Statistics showed. That was in line with a survey forecast by MNI. PPI fell

to zero from 0.6% in May, the lowest level since August 2016, missing 0.2%

forecast by MNI. The indicators are not significant enough to warrant changes in

policies, according to economists.

     TRADE: China's vice premier and top trade negotiator Liu He spoke with U.S.

Trade Representative Robert Lighthizer and Secretary of the Treasury Steven

Mnuchin in a telephone call on Tuesday night to discuss the implementation of

the consensus reached between China and the U.S. at the G20 summit in Osaka.

China's Minister of Commerce, Zhong Shan, also participated in the call,

according to a statement on the Ministry of Commerce website.

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

(OMOs) for a 13th straight day today, resulting in a net drain of CNY20 billion

as that amount of reverse repos matured, according to Wind Information. Total

liquidity in the banking system is at a reasonable and ample level, the PBOC

said.

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

institutions (DR007) fell to 2.4714% from Tuesday's close of 2.5035%, Wind

Information showed. The overnight repo average increased to 1.8076% from

Tuesday's 1.7681%.

     YUAN: The yuan strengthened to 6.8809 against the dollar from Tuesday's

close of 6.8846. The PBOC set the dollar-yuan central parity rate weaker at

6.8856 today, compared with 6.8853 on Tuesday.

     BONDS: The yield on the benchmark 10-year China Government Bond was last at

3.1725%, up from Tuesday's close of 3.1625, according to Wind Information.

     STOCKS: The benchmark Shanghai Composite Index fell 0.44% to 2,915.30. Hong

Kong's Hang Seng Index increased 0.31% to 28,204.69.

     FROM THE PRESS: Baoshang Bank, the small lender seized by the PBOC earlier

this year, has completed the process of replacing all of its Negotiable

Certificates of Deposits (NCDs), according to the PBOC. Through its Weibo

account, the Central Bank said today that it had endorsed the new NCDs, along

with the China Banking and Insurance Regulatory Commission and the Deposit

Insurance Fund. 96.5% of the NCD holders agreed with the replacement, which

concerned NCDs amounting to a total of CNY43.59 billion, the PBOC statement

said.

     Chinese mortgage lending rates are likely to rise this year as banks'

credit funds tighten, according to a report in the PBOC controlled newspaper

Financial News. Citing Li Wanfu, an analyst at the Rong360 Big Data Research

Center, the report says that tighter regulation in housing hotspots would also

expert upward pressure on rates.

     Regulators should take timely measures to curb the rise in deposit interest

rates, the Economic Daily said in a commentary today. Deposit rates have been

rising due to fierce competition from commercial banks, the advent of new

financial vehicles and enthusiastic investor sentiment, 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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