MNI China Daily Summary: Thursday, July 15

POLICY: China's economic recovery will continue in H2, Liu Aihua, spokeswoman of the National Bureau of Statistics, said on Thursday, citing strong domestic demand and market confidence. Second-quarter GDP slowed to 7.9% from Q1's record gain of 18.3%, and a tad below the 8.0% expansion expected.

DATA: Industrial production grew 8.3% y/y in June, beating the 8.0% median projection but down from the 8.8% gain in May. Retail sales rose 12.1% y/y in June, below May's 12.4% gain, though outshining the 10.8% forecast. Fixed-asset Investment registered a growth of 12.6% y/y in H1, decelerating from 15.4% in Jan-May, though beating the 12.0% projection.

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY100 billion through one-year medium-term lending facility (MLF) with the rate unchanged at 2.95% and CNY10 billion via 7-day reverse repos with the rate unchanged at 2.2%. The operation drained net CNY30 billion from the market as CNY400 billion MLF and CNY10 billion matured today, according to Wind Information. The operation aims to keep liquidity reasonable and ample considering the demands for medium and long-term funds at the current tax payment period, the PBOC said on its website.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) increased to 2.1646% from 2.1535% on Wednesday, Wind Information showed. The overnight repo average rose to 2.0834% from the previous 1.9771%.

YUAN: The currency strengthened to 6.4612 against the dollar from 6.4728 on Wednesday. The PBOC set the dollar-yuan central parity rate lower at 6.4640, compared with the 6.4806 set on Wednesday.

BONDS: The yield on 10-year China Government Bond was last at 2.9875%, up from Wednesday's close of 2.9675%, according to Wind Information.

STOCKS: The Shanghai Composite Index rallied 1.02% to 3,564.59, while the CSI300 index increased 1.35% to 5,151.46. Hang Seng Index edged up 0.75% to 27,996.27.

FROM THE PRESS: China's local governments are expected to significantly increase the selling of the so-called special-purpose bonds to invest more in infrastructure in the third quarter, the Securities Times reported citing industry insiders. As of July 12, disclosed offerings of Q3 special-purpose bonds totaled CNY1.3 trillion, compared with CNY1 trillion for the first half, the newspaper said citing Ministry of Finance data. The special-purpose bonds will provide the fiscal stimulus to prop up growth as the previous drivers of exports and real estate began to weaken, the newspaper said citing economists.

China's State Council said authorities will severely punish and publicly shame those found profiting from illegal hoarding and reselling commodities and evade taxes, after a recent audit found such instances that disrupted market order and fair competition, according to a statement on Gov.cn following a Wednesday meeting chaired by Premier Li Keqiang. The cabinet also ordered officials to continue to be frugal and curb spending, carry out tax reductions and job creation policies that support small businesses, the statement read. Authorities should also further improve delivery services in rural regions that facilitate e-commerce and spending, according to the statement.

The U.S. is pursuing "decoupling" with China using human rights issues as a pretext, and such measures as banning U.S. companies from supply chains involving Xinjiang will severely undermine bilateral cooperation on climate change and finance, the Global Times said citing Lv Xiang, a researcher at the state-run think tank Chinese Academy of Social Sciences. The Biden administration will open the stage for Chinese countermoves including the first use of China's entity list to punish unreliable supply chain partner companies and cause more boycotts of their goods by Chinese consumers, the newspaper said. Xinjiang accounts for around half of the world's polysilicon capacity, raw material for solar panels, so the measures will hurt U.S. efforts developing renewable energy, the newspaper said.