MNI China Daily Summary: Wednesday, June 22

POLICY: More measures to drive employment and boost demand in China are needed to help spur consumers to start spending more in the second half of the year to push an economic rebound, according to analysts. Consumption has gained impetus from a mid-year online shopping spree as pandemic curbs were eased for some Chinese major cities, including commercial hub Shanghai, after two months of strict lockdown that brought most deliveries to a halt.

LIQUIDITY: The People's Bank of China (PBOC) injected CNY10 billion via 7-day reverse repos with the rate unchanged at 2.1%. This keeps the liquidity unchanged after offsetting the maturity of CNY10 billion repos today, according to Wind Information. The operation aims to keep liquidity reasonable and ample, the PBOC said on its website.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.6922 from the close of 1.7037% on Tuesday, Wind Information showed. The overnight repo average decreased to 1.4379% from the previous 1.4395%.

YUAN: The currency weakened to 6.7171 against the dollar from 6.6995 on Tuesday. The PBOC set the dollar-yuan central parity rate higher at 6.7109 on Wednesday, compared with 6.6851 set on Tuesday.

BONDS: The yield on the 10-year China Government Bond was last at 2.8230%, down from Tuesday's close of 2.8275%, according to Wind Information.

STOCKS: The Shanghai Composite Index lost 1.20% at 3,267.20, while the CSI300 index fell 1.27% to 4,270.62. Hang Seng Index tumbled 2.56% to 21,008.34.

FROM THE PRESS: The issuance of local government bonds in June is expected to hit a new high this year, likely exceeding CNY1.5 trillion, the China Securities Journal reported. The incremental debt funds will support local fiscal spending in the next two months, as it is expected to leverage trillions of funds to promote infrastructure investment, the newspaper said citing Zuo Yiming, senior analyst at Pengyuan International. According to the current issuance plans, all the CNY3.65 trillion of infrastructure-backed special bonds set for this year will be basically sold by end-June as scheduled, the newspaper said.

China will increase macro policy intensity, and plan incremental policy tools ahead, so to effectively manage risks and keep the economy operating within a reasonable range, the Securities Times reported citing the Minister of Finance Liu Kun speaking to the National People’s Congress Standing Committee on Tuesday. China is facing growing pressure to balance fiscal revenue and expenditure, requiring hard work to complete the budget target this year, Liu was cited as saying. The national general public budget revenue in the first five months was CNY8.67 trillion, falling 10.1% y/y, while the budget expenditure was CNY9.91 trillion, rising 5.9% y/y, the newspaper said.

More Chinese rural banks will be restructured as regulators speed up risk disposal, Yicai.com reported citing analysts following a brewing banking scandal in Central China’s Henan Province. China has a total 1,651 rural banks in China, even more than the number of counties, and 122 of them were labeled as high-risk institutions by the central bank as of Q2 2021, accounting for about 29% of all high-risk institutions, the newspaper said. Rural banks in general bear higher non-performing loan ratios than other banks, with the NPL rate standing at 4% in 2020, which compared to the 2% of city commercial banks and 2.4% of rural commercial banks, Yicai said citing a report by HuaAn Securities.