MNI China Daily Summary: Wednesday, June 24

     EXCLUSIVE: The People's Bank of China (PBOC) could cut reserve requirement

ratios in the next few weeks to support increased government bond issuance and

following an official call for banks to do more to help the real economy, but

interest rates may only see a small additional reduction later this year, policy

advisors told MNI. 

     LIQUIDITY: Liquidity tightened across China's interbank markets in June, as

cash demand from special Treasury bond issuances, tax payments and quarter-end

regulatory needs alongside maturing central bank injections drained funds from

the system, the latest MNI Liquidity Conditions Index shows. The Liquidity

Condition Index rose for a fourth straight month, surging to 81.3 in June from

30.0 in May, hitting the highest level in five months, with almost two-thirds of

respondents seeing tightening.

     LIQUIDITY: The PBOC injected CNY180 billion via 7-day reverse repos with

rates unchanged. This resulted in a net injection of CNY180 billion as no

reverse repos matured today, according to Wind Information. The operations aim

to maintain stable liquidity at the end of the half year, the PBOC said on its

website.

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

institutions (DR007) rose to 2.1334% from Tuesday's close 2.1070%, Wind

Information showed. Overnight repo average fell to 1.4776% from 1.9409%

yesterday.

     YUAN: The yuan weakened to 7.0746 against the dollar from Tuesday's close

7.0650. PBOC set the dollar-yuan central parity rate lower for a third trading

day at 7.0555, compared with the 7.0671 set on Tuesday.

     BONDS: The yield on 10-year China Government Bonds was last at 2.8650%,

down from Tuesday's close of 2.9100%, according to Wind Information.

     STOCKS: The Shanghai Composite Index gained 0.30% to 2,979.55. Hong Kong's

Hang Seng Index lost 0.50% to 24,781.58.

     FROM THE PRESS: Local governments are required to report the amount of

fiscal funds they need and how they will be used to the Ministry of Finance by

the end of June, the 21st Century Business Herald reported citing an unnamed

source. Following these reports, the ministry will assign the CNY2 trillion made

available by expanding the deficit and issuing special Treasury bonds to local

governments as soon as possible. The CNY1 trillion from the expanded deficit can

be used for investment or general government spending, while the balance of CNY1

trillion should focus on infrastructure investment, though part of the funds

from special Treasury bonds are also allowed to support low-income earners and

difficult enterprises and pay wages to civil servants, the newspaper said citing

a source close to the Ministry.

     China's investment in the transport sector for the first five months of

2020 grew by 0.9% y/y, turning positive for the first time this year and

indicating the investment gap caused by the coronavirus epidemic has been

filled, the Beijing Business Today reported citing the Ministry of Transport. In

May, transport investment was CNY343.3 billion, a rise of 27% y/y, accelerating

8.9 percentage points compared with April. Currently, 99.84% of transportation

projects under construction have resumed operation, the newspaper added.

     China will issue a total of CNY3.5 billion from the central budget in two

batches to boost infrastructure and cover the shortfall in public services in

Hainan province, so to accelerate the construction of the Hainan Free Trade

Port, the Economic Information Daily reported citing the National Development

and Reform Commission. The funds would be invested in major infrastructure such

as bonded zone supervision facilities, support leading industries such as

tourism and strengthen epidemic prevention systems in Hainan, 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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