MNI China Daily Summary: Monday, June 16

POLICY: Beijing will continue implementing active macro policies to enhance economic momentum, according to Fu Linghui, spokesperson for the National Bureau of Statistics (NBS). "China's policy tool box has sufficient reserves," Fu said, adding the economy had showed resiliance despite external uncertainty. 

DATA: China's retail sales quickened to 6.4% y/y in May from April's 5.1% growth, hitting the highest level since December 2023, beating the 4.9% forecast, according to data released by the NBS. Industrial production increased 5.8% y/y in May to record a six-month low, down from April's 6.1% growth, and missing the expected 6.0%. Fixed-asset investment decelerated for the third month to 3.7% y/y in the first five months from the previous 4.0% result, underperforming expectations of 4.0%. 

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY242 billion via 7-day reverse repos, with the rate unchanged at 1.40%. The operation led to a net injection of CNY68.2 billion after offsetting the maturity of CNY173.8 reverse repo today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) rose to 1.5261% from 1.5020%, Wind Information showed. The overnight repo average decreased to 1.3906% from 1.4122%. 

YUAN: The currency strengthened to 7.1802 against the dollar from the previous 7.1813. The PBOC set the dollar-yuan central parity rate higher at 7.1789, compared with 7.1872 set on Friday. The fixing was estimated at 7.1849 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 1.6410%, down from the previous close of 1.6425%, according to Wind Information. 

STOCKS: The Shanghai Composite Index edged up 0.35% to 3,388.73, while the CSI300 index increased 0.25% to 3,873.80. The Hang Seng Index rose 0.70% to 24,060.99. 

FROM THE PRESS: China will make greater efforts to help the real-estate market bottom out and recover, according to the State Council executive meeting. Authorities have pledged to conduct a comprehensive survey of available land and ongoing housing projects nationwide to improve policy effectiveness further and adopt a comprehensive approach to stabilise expectations, stimulate demand, optimise supply, and resolve risks, the meeting said. (Source: People’s Daily)

Chinese consumers remain cautious about increasing leverage, with new short-term residential loans falling in May by CNY45.1 billion compared to the same period last year, Yicai.com reported, citing analysts. The decline was partly due to the suspension of consumer loans with interest rates below 3%, as well as the waning impact of the consumer goods trade-in scheme. Meanwhile, a CNY74.6 billion rise in medium- and long-term household loans was mainly driven by home purchases in higher-priced first- and second-tier cities, the report said.

The impact of the recent U.S. tariff reduction on Chinese exports has yet to materialise fully, as exports to the U.S. still fell by 34.5% year-on-year in May, down a further 13.5 percentage points from April, according to Guan Tao, global chief economist at BOCI China, writing in Yicai.com. He attributed the lag to the time needed between the May 12 tariff cut announcement and the subsequent receipt of orders, production adjustments, and shipping. Guan also cautioned that the negative impact should not be underestimated, noting that many of the goods experiencing steep declines were lower in value and typically produced by small and medium-sized enterprises.