MNI China Daily Summary: Tuesday, July 6

EXCLUSIVE: The People's Bank of China, curbing credit growth to avoid fueling bubbles after its Covid stimulus, is facing calls from some advisors and economists to be cautious as it further normalises policy, amid doubts over how long a surge in exports can last and concerns over weak consumption.

LIQUIDITY: The PBOC injected CNY10 billion via 7-day reverse repos with the rate unchanged at 2.2% on Tuesday. The operation resulted in a net drain of CNY20 billion given the maturity of CNY30 billion reverse repos today, according to Wind Information. The operation aims to keep liquidity reasonable and ample, the PBOC said on its website.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) increased to 2.0263% from the close of 1.9537% on Monday, Wind Information showed. The overnight repo average rose to 1.9052% from the previous 1.6630%.

YUAN: The currency weakened to 6.4627 against the dollar from Monday's close of 6.4608. The PBOC set the dollar-yuan central parity rate lower at 6.4613 on Tuesday, compared with the 6.4695 set on Monday.

BONDS: The yield on 10-year China Government Bonds was last at 3.1100%, up from Monday's close of 3.1050%, according to Wind Information.

STOCKS: The Shanghai Composite Index fell 0.11% to 3,530.26, while the CSI300 index edged down 0.05% to 5,083.10. The Hong Kong's Hang Seng Index lost 0.25% to 28,072.86.

FROM THE PRESS: China's GDP growth may slow to 8.0% y/y in Q2 from Q1's 18.3% given the eased base effect, and that the resurgence of the epidemic and rising commodity prices slowed the recovery of consumption and manufacturing investment, Yicai.com reported citing Luo Zhiheng, deputy dean of the research institute of Yuekai Securities. The pressure of stabilizing growth will increase in H2, as supply constraints and rising costs in the supply side, as well as high leverage and weak spending on the demand side both limit economic growth, the newspaper said citing Wang Jun, chief economist of Zhongyuan Bank.

Local governments in China may not accelerate the sales of bonds in H2 as the central government has introduced several measures to tighten the regulation on special bonds backed by infrastructure, the 21st Century Business Herald reported citing analysts. As an example, in a province in western China, only 40% of over 2,000 infrastructure projects got approved as review processes tightened, the newspaper said. The issuance of new special bonds has been slow with a quota of about CNY2.1 trillion to be issued in H2, the newspaper said. New quota for special bonds may drop significantly from next year, as they are no longer needed for stabilizing growth, the newspaper cited Zhou Yue, chief fixed-income analyst of Zhongtai Securities.