MNI China Daily Summary: Wednesday, July 3

     TOP NEWS: The U.S.-China trade ceasefire should largely rule out any need

for major new economic stimulus measures in the second half of the year to

maintain Chinese growth within the targeted range, according to Ma Jun, a member

of the People's Bank of China (PBOC) Monetary Policy Committee, in an exclusive

interview with MNI. The PBOC's former chief economist expressed his optimistic

outlook following the weekend agreement between the America and China's leaders

at the G20 in Japan for trade talks to resume. Ma said the expectation that

there would be no further escalation in the trade conflict underlined his belief

that Beijing would have little need to go beyond existing economic stimulus

measures to sustain the required rate of growth. "The consensus reached by

President Xi and Trump during the G20 Summit has delivered an important and

positive certainty (to China and global economy)," Ma said. "We are confident

that China's economy is likely to keep above 6% GDP growth and below the 5.5%

surveyed unemployment rate without major new stimulus policies as long as the

trade war would not escalate in H2."

     TRADE: China and the U.S. should reach a pragmatic trade deal in a matter

of months based on progress made in the previous 11 rounds of negotiations - and

tackle some of Washington's major sticking points separately through talks to

shape Beijing's new Foreign Investment Law (FIL), a prominent trade expert in

Beijing told MNI in an interview. "We should see a deal within a few months as

both sides are willing, but we should not expect a perfect deal," said Wang

Huiyao, President of the Center for China and Globalization (CCG), a prominent

think tank. "The best result would be that the two sides sign up to the 90%

agreement they made previously."

     DATA: The Caixin China general services PMI index fell to 52 in June from

May's 52.7, a sign of a slowing service industry across China. The gauge of

China's smaller service companies is at a four-month low, Caixin said. The

growth of new orders accelerated slightly, as customer demand was boosted by

stimulus policies, new product launches and better market conditions, Caixin

noted. The total volume of new export orders decreased for the first time in

nine months. Some companies reported weakening demand overseas and additional

tariffs led to the decline, Caixin said.

     LIQUIDITY: The PBOC skipped open market operations (OMOs) for an eighth

straight day today, resulting in a net drain of CNY40 billion as that amount of

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

banking system is at a relatively high level, enough to offset the maturity of

reverse repos, according to the PBOC.

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

institutions (DR007) rose to 2.0567% from Tuesday's close of 1.9126%, Wind

Information showed. The overnight repo average decreased to 0.8627% from

Tuesday's 0.9017%.

     YUAN: The yuan strengthened to 6.8833 against the dollar from Tuesday's

close of 6.8835. The PBOC set the dollar-yuan central parity rate weaker at

6.8640 today, compared with 6.8513 set on Tuesday.

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

3.1550%, down from Tuesday's close of 3.1700, according to Wind Information.

     STOCKS: The benchmark Shanghai Composite Index fell 0.94% to 3,015.26. Hong

Kong's Hang Seng Index decreased 0.07% to 28,855.14.

     FROM THE PRESS: China should continue to increase support for private

companies which account for a large proportion of exporters, as well as cutting

taxes and fees across the export process, the Securities Daily said today citing

Ming Ming, chief fixed-income analyst of CITIC Securities. Innovative products,

such as smart home appliances and smart phones, should be China's key export

goods in the future, and the government should increase policy and fiscal

support, along with innovation subsidies, the newspaper said citing Fu Yifu,

senior researcher at Suning Institute of Finance.

     China should see Q2 GDP growth of 6.3% y/y, within the year's 6 - 6.5%

target range, the Securities Daily reported today citing analysts. Future GDP

growth depends on how infrastructure investment performs after recent stimulus,

and when the stimulus for boosting consumption kicks in, the paper said, citing

Hua Changchun, chief economist at Guotai Junan Securities.

     The challenges to globalization from protectionism and populism need to be

met by fresh leadership based on openness, cooperation and responsibility, the

Economic Information Daily said in a front-page article today. China, as a firm

supporter of globalization, has taken the responsibility to open up its economy

via significantly reducing the overall level of tariffs, further relaxing market

access and promoting the Belt and Road initiative, 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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