MNI China Daily Summary: Friday, July 18

EXCLUSIVE: China's Loan Prime Rate is seen remaining unchanged this month as the People’s Bank of China (PBOC) calculates that earlier interest rate cuts and reserve requirement reductions are continuing to take effect and as it relies on structural and liquidity tools for monetary easing.

EXCLUSIVE: China is likely to announce only limited measures to boost its real estate sector, including renovation of sub-standard housing, despite market speculation of a major stimulus package ahead of the month-end politburo meeting, advisors and analysts told MNI, though they highlighted the significance of a move to allow cities to use national government funds to buy property. 

POLICY: Chinese goods are currently subject to tariffs exceeding 50% in the U.S., among the highest in the world, Commerce Minister Wang Wentao told reporters. Wang emphasized that both countries have recognised the mutual need for certain goods that are difficult to replace in the short term.

LIQUIDITY: The PBOC conducted CNY187.5 billion via 7-day reverse repos, with the rate unchanged at 1.40%. The operation led to a net injection of CNY102.8 billion after offsetting maturities of CNY84.7 today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.5067% from 1.5223%, Wind Information showed. The overnight repo average decreased to 1.4566% from 1.4635%. 

YUAN: The currency strengthened to 7.1766 against the dollar from the previous 7.1796. The PBOC set the dollar-yuan central parity rate higher at 7.1498, compared with 7.1461 set on Thursday. The fixing was estimated at 7.1734 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 1.6640%, up from the previous close of 1.6610%, according to Wind Information.

STOCKS: The Shanghai Composite Index edged up 0.50% to 3,534.48, while the CSI300 index increased 0.60% to 4,058.55. The Hang Seng Index rose 1.33% to 24,825.66.

FROM THE PRESS: China should consider front-loading next year’s government bond quota, to address local government implicit debt and help offset the shortfall in government bond supply expected in the final quarter, according to Ming Ming, chief economist at CITIC Securities. Authorities need to expand liquidity injections and reduce benchmark interest rates in the second half, Ming added. The use of unsold units purchased by authorities should be expanded to cover long-term rental housing and apartments for skilled talent, accompanied by more flexible eligibility criteria, said Yuan Haixia, president of China Chengxin International Research Institute. (Source: China Securities Journal)

China has lowered the price threshold for collecting consumption tax on luxury cars, China Securities Journal reported, citing a statement released on Thursday by the Finance Ministry. Starting July 20, such taxes will apply to cars with a retail price of CNY900,000 or above, compared to the existing rule from 2016 of CNY1.3 million, the newspaper said. Luxury cars have seen a price drop in recent years, driven by expanded production and technological advances, the newspaper said, citing He Daixin, researcher from the Chinese Academy of Social Sciences. The ministry stated that second hand ultra-luxury vehicles will be exempt from consumption tax, the newspaper noted.

The added value of state-owned enterprises directly under the central government reached CNY5.2 trillion in the first half of the year, with a total profit of CNY1.4 trillion, while fixed-asset investment hit CNY2 trillion, People's Daily reported, noting the results demonstrated SOEs' leading role in stabilising the economy. Central state-owned enterprises invested CNY414 billion in research and development in H1, with an intensity to GDP measure of 2.26%, roughly unchanged from the same period last year, according to the Daily.