MNI China Daily Summary: Monday, July 7

EXCLUSIVE: Beijing is preparing to launch a policy-based financial instrument to replenish capital for key infrastructure projects aimed at boosting consumption and strengthening technology capacity, advisors and analysts told MNI, with some estimating an initial scale of CNY500 billion.

POLICY: China's foreign exchange reserves rose by USD32.2 billion in June, as the U.S. dollar index fell and global financial asset prices generally rose, data by the State Administration of Foreign Exchange showed.

LIQUIDITY: The PBOC conducted CNY106.5 billion via 7-day reverse repos, with the rate unchanged at 1.40%. The operation led to a net drain of CNY225 billion after offsetting the maturity of CNY331.5 reverse repo today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) rose to 1.4660% from 1.4222%, Wind Information showed. The overnight repo average increased to 1.3146% from 1.3140%.

YUAN: The currency weakened to 7.1747 against the dollar from 7.1652 on Friday. The PBOC set the dollar-yuan central parity rate lower at 7.1506, compared with 7.1535 set on Friday. The fixing was estimated at 7.1656 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 1.5800%, up from the previous close of 1.5850%, according to chinamoney.com.cn.

STOCKS: The Shanghai Composite Index rose 0.02% to 3,473.13, while the CSI300 index decreased 0.43% to 3,965.17, The Hang Seng Index edged down 0.12% to 23,887.83.

FROM THE PRESS: 

China will take reciprocal measures against imported EU medical devices after the European Commission restricted Chinese companies and products from participating in its public procurement process, according to a notice from the Ministry of Commerce. A television news report from state media said EU exporters will be excluded for medical device tenders worth over CNY45 million, but European-funded companies in China can still participate. For non-EU companies, the proportion of medical devices imported from the EU shall not exceed 50% of the total contract amount.

Authorities need to stabilise employment, enterprises, markets and expectations better, the Economic Daily commentary said, calling for quick policy support. The newspaper advocated for the prompt issuance of ultra-long-term special treasury bonds, noting that four upcoming issuances are ahead of schedule. The country’s policy toolbox remains well-stocked with additional room for macro policies, the newspaper said.

New yuan loans are expected to reach about CNY2.1 trillion in June, with seasonal factors supporting growth from May’s CNY620 billion, Securities Daily reported, citing Wang Qing, analyst at Gold Credit Rating, who also highlighted last year's low base period comparison. He projected that aggregate financing would rise to approximately CNY4 trillion in June, up from CNY2.29 trillion in May, driven by a surge in government bond issuance and a rebound in corporate bond sales, supported by lower financing costs after the central bank’s reserve requirement ratio (RRR) cut in May.