MNI China Daily Summary: Wednesday, June 17

     TOP NEWS: The Beijing municipal government raised coronavirus alert to

Level 2 from 3 after 106 new locally transmitted Covid-19 cases in the past five

days, Deputy Secretary Chen Bei said at at a press conference Tuesday night.

Kindergartens and schools will be shut from Wednesday, and residents living in

communities deemed medium or high risk, as well as people connected to the

Xinfadi wholesale food market where a cluster of virus infections was centred,

are banned from leaving the city. There is currently one high-risk area and 27

medium-risk areas in the city.

     POLICY: An upcoming meeting between U.S. State Secretary Pompeo and a top

Chinese diplomat will touch on Beijing's moves to extend its national security

legislation to Hong Kong but is unlikely to cover trade as the two countries try

to patch up frayed relations, policy advisors told MNI. While the bilateral

relationship has been at its low ebb in decades, some signs of rapprochement

have emerged ahead of the meeting between Pompeo and State Councillor Yang

Jiechi, including an announcement by the U.S. Department of Commerce that it

would allow U.S. companies to work with Huawei on 5G standards and Beijing's

decision to permit American carriers to resume flights to China.

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

operations, draining CNY60 billion from the maturity of reverse repos, according

to Wind Information. Liquidity in the banking system is reasonable and ample,

the PBOC said on its website.

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

institutions (DR007) rose to 2.0453% from Tuesday's close 1.8641%, Wind

Information showed. Overnight repo average increased to 2.0548% from 1.7529%

yesterday.

     YUAN: The yuan weakened to 7.0866 against the dollar from Tuesday's close

7.0818. PBOC set the dollar-yuan central parity rate higher at 7.0873 on

Wednesday, compared with the 7.0755 set on Tuesday.

     BONDS: The yield on 10-year China Government Bonds was last at 2.8950%, up

from Tuesday's close of 2.8550%, according to Wind Information.

     STOCKS: The Shanghai Composite Index gained 0.14% to 2,935.87. Hong Kong's

Hang Seng Index edged up 0.56% to 24,481.41.

     FROM THE PRESS: The PBOC is likely to cut banks' reserve requirement ratios

at the end of June or in early July to ease the liquidity gap caused by

medium-term lending facilities (MLFs) maturing this month, the Economic

Information Daily said in a commentary. The PBOC may consider cutting interest

rates again after inter-bank interest rates return to a desired level,

structured deposits decline and the arbitrage of funds ease, the newspaper said.

There is room for cuts of between 20-30 bps on the MLF rate in Q3 and Q4, and

the benchmark deposit rate may also be lowered in Q3 given the easing inflation

and the narrowing net interest margins of banks, the daily said.

     Land transactions will continue to be at a high level in June as real

estate developers approach the half-year mark and rush for high-quality land,

the Economic Information Daily reported. First and Second-tier cities have

increased land supply, particularly of high-quality land to lure developers and

accelerate the recovery in their land markets, the newspaper said. In

particular, Nanjing and Guangzhou saw land transaction fees in the first five

months rise 157% and 93% y/y, respectively. Developers' interest in acquiring

land has increased again as the financial difficulties decreased, the newspaper

said citing Zhang Dawei, chief analyst of Centaline Property Agency.

--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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