MNI China Daily Summary: Wednesday, July 17

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY270 billion via 7-day reverse repo, with the rates unchanged at 1.80%. The operation has led to a net injection of CNY268 billion after offsetting the CNY2 billion maturity today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) decreased to 1.8995% from the close of 1.9011% on Tuesday, Wind Information showed. The overnight repo average rose to 1.9230% from 1.9097%.

YUAN: The currency strengthened to 7.2651 against the dollar from Tuesday's close of 7.2662. The PBOC set the dollar-yuan central parity rate lower at 7.1318 on Wednesday, compared with 7.1328 set on Tuesday. The fixing was estimated at 7.2646 by Bloomberg survey today.

BONDS: The yield on the 10-year China Government Bond was last at 2.2511%, down from Tuesday's close of 2.2520%, according to chinamoney.com.cn.

STOCKS: The Shanghai Composite Index edged down 0.45% to 2,962.85, while the CSI300 index edged up 0.09% to 3,501.58. The Hang Seng Index gained 0.06% to 17,739.41.

FROM THE PRESS: China’s infrastructure investment is likely to reach 6-7% y/y by year-end from the 5.7% in H1, supported by accelerated issuances of project-linked ultra-long-term special treasury bonds, local government special bonds and expected fiscal expansion, China Securities Journal reported citing analysts. The construction of major projects has quickened with the completion of CNY337 billion of railway investment in H1, which grew by 10.6% y/y to hit a record high for the same period in history, the newspaper said. Investment in water conservancy projects also rose by 4.7% y/y to reach CNY783 billion in H1, the newspaper added.

China’s Loan Prime Rate may be lowered in July without a corresponding change to the medium-term lending facility as policymakers improve LPR quotations to reflect market interest rates and economic conditions better, according to Wang Qing, chief macro analyst at Golden Credit Ratings. Wen Bin, chief economist at Minsheng Bank, expects authorities to implement deposit interest rate reductions to protect banks’ net interest margins should the LPR be lowered. (Source: Securities Daily)

China must prioritise increasing fiscal revenues in H2 to reverse the downward trend of public finances in H1, according to Hu Xiaopeng, deputy director at the Institute of World Economics of the Shanghai Academy of Social Sciences. Authorities need to accelerate consumption tax reforms through central-local sharing, to stimulate local governments into boosting consumption and optimising supply. All sectors of society can benefit from a better business environment if institutional and legal processes are safeguarded, Hu added. (Source: Yicai)