MNI China Daily Summary: Wednesday, June 10

     EXCLUSIVE: China's planned CNY11 trillion fiscal expansion could help

annual growth hit 3% this year, despite disappointment in some quarters over the

size of stimulus package, policy advisors told MNI, with some expecting GDP to

rise by as much as 5% in the best-case scenario. China plans to raise its

deficit by CNY1 trillion in 2020 to CNY3.76 trillion (over 3.6% of GDP), issue

CNY1 trillion special Covid-19 treasury bonds and push forward CNY2.5 trillion

in tax and fee cuts, while assigning an increased CNY3.75 trillion quota to

special purpose bonds for local governments to boost infrastructure investment,

according to the Government Work Report delivered by Premier Li Keqiang last

month.

     LIQUIDITY: The People's Bank of China (PBOC) injected CNY60 billion via

7-day reverse repos with the rate unchanged at 2.2%. The operation aims to keep

the liquidity reasonable and ample, the PBOC said in a statement on its website.

     DATA: China's May inflation slowed to 2.4% y/y from 3.3% in April as food

supplies improved on eased coronavirus restrictions and better weather. The May

result was the lowest level since March last year. Analysts had expected 2.5%

y/y. Factory-gate prices extended falls to a more than four-year low due to the

high base in the same period last year.

     RATES: The seven-day weighted average interbank repo rate for depository

institutions (DR007) slightly increased to 1.9593% from Tuesday's close of

1.9096%, Wind Information showed. The overnight repo average rose to 1.8456%

from the previous 1.8394%.

     YUAN: The currency strengthened to 7.0670 against the dollar from 7.0882 on

Tuesday. PBOC set the dollar-yuan central parity rate lower for a eighth day at

7.0703 compared with the 7.0711 set for Tuesday.

     BONDS: The yield on 10-year China Government Bond was last at 2.8275%, up

from the close of 2.8225% on Tuesday, according to Wind Information. 

     STOCKS: The Shanghai Composite Index declined 0.42% to 2,9423.75. Hang Seng

Index edged down 0.03% to 25049.73.

     FROM THE PRESS: The proceeds from Special China Government Bonds and

increased fiscal deficits should be allocated to county-level administrations as

soon as possible through a new fiscal transfer system to support

small-and-medium enterprises and people's living expenses, according to a

statement from the State Council's executive meeting. The meeting, chaired by

Premier Li Keqiang on Tuesday, determined that the funds, totalling CNY2

trillion, would also be used to finance public spending on the construction of

public health facilities and other pandemic-control activities.

     China's banks will have to significantly reduce outstanding high yield

structural deposits by the end of this year under new requirements from the

banking regulator, the Shanghai Securities News reported citing an unnamed

source. The move aims to prevent companies from conducting carry trades, as

there were signs that firms are borrowing at cheap prices due to ample

liquidity, and depositing the borrowed money for guaranteed higher yields rather

than investing in the real economy as the central government hoped, the

newspaper said.

     China's education authority issued an alert on Tuesday warning students of

rising racial discrimination and lingering coronavirus risks in Australia. The

alert came after China announced punitive tariffs on Australian barley in May, a

move considered retaliation to Australian endorsement of U.S. proposals to

investigate the origin of the pandemic virus, MNI noted. Education agencies

interviewed by Global Times said overseas student numbers in Australia would be

sluggish for at least a year.

--MNI Beijing Bureau; +86 (10) 8532-5998; email: archie.zhang@marketnews.com

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

[TOPICS: M$A$$$,M$Q$$$,MBQ$$$]