MNI China Press Digest June 25: RRR Cut, Fiscal, Innovation

Highlights from Chinese press reports on Tuesday:

• China’s central bank will likely lower the reserve requirement ratio rather than interest rates this year, given strong U.S. dollar expectations and the need to support fiscal policy, according to Sheng Songcheng, senior advisor at the Lujiazui International Finance Research Institute. Sheng said authorities’ fiscal expenditure this year will be significantly higher than last year, meaning RRR cuts are needed to support banks purchasing of national and local bonds. The central bank will need considerable time before conditions are suitable for trading government bonds in the secondary market, Sheng added. (Source: Yicai)
• China’s general public budget revenue fell by 2.8% y/y to reach CNY9.7 trillion in the first five months, with tax revenue falling by 5.1% but non-tax revenue rising by 10.3%, Securities Times reported. This was linked to penalty and confiscatory income alongside revenue from the use of state-owned assets, the Times said, citing Li Xiaorong, vice dean at the School of Finance and Taxation, Central University of Finance and Economics. The national general public budget expenditure also rose by 3.4% to reach CNY10.8 trillion, a faster pace than in recent years, the newspaper said.
• Local governments must adapt to their specific conditions to develop “new quality productive forces," the People’s Daily reported citing Liu Dongmei, party secretary at the Chinese Academy of Science and Technology for Development. Beijing, Shanghai, and the Guangdong, Hong Kong and Macao Greater Bay Area can play a leading role in promoting future industries via disruptive technological breakthroughs, Liu said. Innovative centers such as Wuhan, Xi’an, Chengdu and Chongqing should not only foster emerging industries, but also drive the development of the central and western regions, Liu added.