MNI China Daily Summary: Tuesday, July 13

POLICY: Monetary policy stability will guide the People's Bank of China in the second half of this year based on domestic inflation and the overall economic situation with a possible tightening move by the US Federal Reserve ahead not a main factor, said Sun Guofeng, head of the central bank's monetary policy department, at a briefing on Tuesday.

POLICY: China's overseas trade growth may slow in the second half of the year from a high base last year and uncertainties around the global pandemic, said Li Kuiwen, China Customs spokesman, at a briefing on Tuesday.

DATA: Strong demand from major trade partners for electronics and medical goods helped China's exports increased nearly 39% y/y to USD1.52 trillion in the first half of the year, the General Administration of Customs said. Imports also jumped 36.0% y/y growth to to USD1.27 trillion. In June, exports rose 32.2% y/y, a faster pace than the 27.9% y/y growth in May and the 13th straight month of growth, and handily beat an expected 23.1% y/y increase. Imports rose almost 37% y/y in June, slowing from the 51.1% growth in May.

LIQUIDITY: The PBOC injected CNY10 billion via 7-day reverse repos with the rate unchanged at 2.2%. The operation left liquidity unchanged given it netted off CNY10 billion reverse repos maturing 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 2.1661% from the close of 2.1392% on Monday, Wind Information showed. The overnight repo average rose to 2.0390% from the previous 1.9408%.

YUAN: The currency strengthened to 6.4651 against the dollar from Monday's close of 6.4727. The PBOC set the dollar-yuan central parity rate lower at 6.4757, compared with the 6.4785 set on Monday.

BONDS: The yield on 10-year China Government Bonds was last at 2.9525%, down from Monday's close of 2.9775%, according to Wind Information.

STOCKS: The Shanghai Composite Index rose 0.53% to 3,566.52, while the CSI300 index edged up 0.18% to 5,142.10. The Hong Kong's Hang Seng Index rallied 1.63% to 27,963.41.

FROM THE PRESS: The PBOC's decision to cut banks' reserve ratios (RRRs) by 0.5 pp announced on July 9 won't likely channel money into the property market as the authorities had introduced centralized loaning for real estate a half year ago, the Economic Daily said citing Lian Ping, the head of research at Zhixin Investment and the former chief economist at Bank of Communications. Regional authorities will also strictly implement government policies prohibiting property speculation, the newspaper said citing analyst Wen Bin of China Minsheng Bank. The RRR cut should be considered a normal operation to manage liquidity and help small businesses obtain financing, not a change in the central bank's prudent monetary policy stance, the newspaper said.

Consumer spending in China in H2 will continue to be impacted by recurring outbreaks both at home and abroad, and is unlikely to return to the previous usual level soon, the Shanghai Securities News reported citing Lian Ping, head of research at Zhixin Investment. Policymakers should try to encourage consumption by policies such as improving infrastructure supporting spending in smaller cities and rural areas, the newspaper said citing Wei Jianguo, a former Vice Minister of Commerce. A major rise in consumption likely won't happen until the October Golden Week holiday, Wei was cited as saying by the newspaper. The number of people traveling and tourism revenues in the second half will likely be around 80% of the levels in 2019, the newspaper said citing a study by the China Tourism Research Institute.

China will seek to protect exports by targeted measures that help exporters manage higher costs and declining profits, the China Securities Journal reported citing Assistant to the Minister of Commerce Ren Hongbin. Chinese exporters are facing higher costs in freight, raw materials and labour, while a more volatile yuan threatens profits and weakens exporters' confidence in accepting orders, the newspaper cited Ren as saying. The commerce ministry will closely monitor the economic situation. increase policy support, and strengthen cooperation with those Belt and Road countries, Ren was cited as saying.