MNI China Daily Summary: Monday, July 21

POLICY: China’s electricity consumption grew 5.4% y/y in June, with residential demand up10.8% y/y, data from the National Energy Administration showed.

POLICY: China’s Loan Prime Rate remained unchanged, in line with market expectations, as the People’s Bank of China opted to maintain a cautious approach to rate cuts, calculating that previous moves are still working through the economy, according to an official statement.

LIQUIDITY: The PBOC conducted CNY170.7 billion via 7-day reverse repos, with the rate unchanged at 1.40%. The operation led to a net drain of CNY55.5 billion after offsetting maturities of CNY226.2 billion today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) decreased to 1.4901% from 1.5067%, Wind Information showed. The overnight repo average decreased to 1.3621% from 1.4566%.

YUAN: The currency weakened to 7.1768 against the dollar from the previous close of 7.1766. The PBOC set the dollar-yuan central parity rate higher at 7.1522, compared with 7.1498 set on Friday. The fixing was estimated at 7.1786 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 1.6300%, up from 1.6150% at the previous close, according to Wind Information.

STOCKS: The Shanghai Composite Index edged up 0.72% to 3,559.79 while the CSI300 increased 0.67% to 4,085.61. The Hang Seng Index increased 0.68% to 24,994.14.

FROM THE PRESS: China’s strong economic performance in H1 puts the annual growth target well within reach and gives officials space to prioritise structural reforms in H2, rather than new macroeconomic measures, according to Guan Tao, former senior official at the State Administration of Foreign Exchange. While the trade-in programme has delivered notable results, Guan said that efforts to sustainably boost consumer demand require reforms aimed at improving residents’ expectations for permanent income and strengthening overall consumption capacity.

Japan’s Nippon Steel’s profit of CNY16.9 billion in 2024 exceeded the combined earnings of China’s four largest steel producers, according to Yicai.com. The result highlights the success of Japan in restructuring following the collapse of the real estate bubble in the 1990s and the sharp drop in domestic demand. China’s top ten steel companies collectively account for only about 40% of the Chinese market and continue to compete with largely homogenous products, said Ge Xin, deputy director at the Lange Steel Network Research Center. Amid growing trade restrictions on Chinese exports of finished steel products, mills have ramped up overseas sales of semi-finished steel billets, Ge said, noting that slabs exported to South Korea are priced roughly CNY100 per tonne lower than those produced at local mills.

China’s Inclusive Finance Prosperity Index, which tracks inclusive financial support for small and micro enterprises and the real economy, rose to 49.03 points in June, up 0.07 points from May, an indication that financial backing for the real economy remains steady. Within the index’s business prosperity sub-index, four sectors posted gains, including retail and information services, while five sectors declined, notably construction, transportation, and accommodation and catering. The index is jointly published by the China Economic Information Service, the China Banking Association, and the China Association of Small and Medium Enterprises. (Source: Securities Daily)