MNI China Press Digest June 03: New Loans, CPI, Bonds

Highlights from Chinese press reports on Monday:

• China’s new yuan loans in May are expected to reach CNY1.5 trillion compared to April’s CNY730 billion, mainly driven by abundant bank credit lines, Securities Daily reported citing Wang Qing, analyst at Golden Credit Rating. Bank bills may be the main driver as corporate credit demand could still remain low, while residential loans may show a month-on-month improvement from April, the newspaper said citing analysts. Aggregate finance is estimated to reach CNY2.3 trillion in May, compared to the CNY198.7 billion contraction in April, Wang was cited as saying. The People’s Bank of China is set to release May data next week.
• Industry insiders predict May’s CPI will reach 0.3%, unchanged from last month, according to the Securities Daily. However, Liu Peizhong, a researcher at the Bank of China expects a slight increase, noting pork CPI was trending higher and egg prices were up for the first time in six months. Liu believes PPI will likely rebound m/m, with this month’s PMI indices for raw material purchasing and factory gate prices expanding, indicating a potential increase in industrial product prices. (Source: Securities Daily)
• Investors need to consider that China’s inflation rate could increase in the long term and drive up long-term interest rates, making recent appetite for low-yield long duration bonds potentially unprofitable, according to Guan Tao, a former senior official at State Administration of Foreign Exchange. China's economy should see lower long-term interest rates as the country enters a new normal of medium-to-high-speed growth, but the long-term inflation outlook remains uncertain. (Source: Yicai)