MNI China Daily Summary: Friday, June 27

EXCLUSIVE: The outcome of the upcoming China-EU Leaders’ Summit scheduled is likely to depend on Brussels' negotiations with Washington by the July 9 deadline to avoid steep U.S. tariffs, advisors in Beijing told MNI, noting that the EU's recent hawkish rhetoric appears designed to placate concerns in Washington.

EXCLUSIVE: China’s 1.6% drop in tax revenue since January is expected to persist through the year, as economic growth shifts from tax-heavy real estate toward lower-yielding new energy industries, with authorities likely to use off-budget measures to support the economy and fill public financing gaps to maintain the budget deficit near the 4% target, local economists told MNI.

EXCLUSIVE:  Recent reforms allowing Hong Kong-listed companies to seek secondary listings in Shenzhen’s A-share market will entice China’s technology giants back to the mainland, boosting capital inflows and helping mitigate geopolitical risk, advisors told MNI, noting the initiative will also facilitate cross-border capital-market connectivity.

POLICY: China and the U.S. have further confirmed details of the framework for implementing the consensus reached by the two heads of state on June 5 and consolidating the outcomes of the Geneva economic and trade talks, the Ministry of Commerce said.

LIQUIDITY: The PBOC conducted CNY525.9 billion via 7-day reverse repos, with the rate unchanged at 1.40%. The operation led to a net injection of CNY364.7 billion after offsetting the maturity of CNY161.2 reverse repo today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) rose to 1.6968% from 1.6850% on Thursday, Wind Information showed. The overnight repo average decreased to 1.3683% from 1.3700%.

YUAN: The currency weakened to 7.1690 against the dollar from 7.1684 on Thursday. The PBOC set the dollar-yuan central parity rate higher at 7.1627, compared with 7.1620 set on Thursday. The fixing was estimated at 7.1744 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 1.6025%, down from Thursday's close of 1.6160%, according to chinamoney.com.cn.

STOCKS: The Shanghai Composite Index was down 0.70% to 3,424.23, while the CSI300 index fell 0.61% to 3,921.76. The Hang Seng Index dropped 0.17% at 24,284.15.

FROM THE PRESS: The yuan is expected to remain relatively strong in the short term, as the U.S. dollar faces depreciation pressure under the White Houses' domestic and foreign policy impacts on the U.S. economy, Securities Daily reported, citing Wang Qing, analyst with Golden Credit Rating. Both the onshore and offshore yuan rose to an intraday high of 7.15 on Thursday, the strongest since mid-November. China’s resilient economy helped support the yuan, with stable growth in industrial production and retail sales, as well as good capital market performance attracting inflows of cross-border funds, the newspaper said, citing analysts.

China has continuously accelerated the review of rare earth-related export license applications, said He Yadong, spokesperson at the Ministry of Commerce at a press conference, responding to reports that the EU ambassador to China asked Beijing to solve the current shortage before the leaders' summit next month. He said authorities have approved a number of compliant applications and are willing to further strengthen communication on export controls with relevant countries.

China’s fiscal policy will focus on already announced measures plus the timely introduction of additional actions going forwards, Yicai.com reported, citing fiscal and taxation experts. Previous years' policies normally included the issuance of special or general treasuries, local government bonds and policy-based financial instruments. The measures, generally introduced in H2, especially in Q4, increased fiscal funds to stabilise investment, employment and the housing market, and ensured the annual growth target was met, the newspaper said citing experts.