MNI China Daily Summary: Monday, June 8

POLICY: China plans to construct or renovate about 770,000 kilometres of urban underground pipelines during the 15th Five-Year Plan period, Chen Shaopeng, a department head at China's Ministry of Housing and Urban-Rural Development, told reporters.

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY218.5 billion via seven-day reverse repos, with the rate unchanged at 1.4%. The operation led to a net injection of CNY207.5 billion after offsetting maturities of CNY11 billion reverse repos today, according to Wind Information. 

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) rose to 1.4031% from 1.3798%, Wind Information showed. The overnight repo average increased to 1.3675% from 1.3589%. 

YUAN: The currency weakened to 6.7844 against the dollar from the previous 6.7712. The PBOC set the dollar-yuan central parity rate higher at 6.8198, compared with 6.8157 set on Friday. The fixing was estimated at 6.7979 by Bloomberg survey today.

BONDS: The yield on the 10-year China government bond was last at 1.7175%, up from the previous close of 1.7050%, according to Wind Information. 

STOCKS: The Shanghai Composite Index fell 1.70% to 3,959.34, while the CSI300 index decreased 2.14% to 4,713.64. The Hang Seng Index lost 1.22% to 24,657.06. 

FROM THE PRESS: Recent BIS data shows yuan internationalisation is not aimed at replacing the dollar, said Guan Tao, a former senior official at China’s State Administration of Foreign Exchange. USD/RMB trading accounted for 98.5% of the increase in total yuan foreign-exchange turnover across the two most recent BIS surveys, Guan noted. Over the same period, USD/RMB trading accounted for 15.5% of the increase in total dollar FX turnover, making the yuan the second-largest contributor to dollar turnover growth after the yen, Guan added.

China’s trade surplus is likely to narrow in the second half as import growth accelerates and prices rise, while Beijing’s push to expand imports supports more balanced trade development, said Wen Bin, chief economist at China Minsheng Bank. Wen said China continues to ease market access in service sectors including telecommunications, healthcare and internet services, while deepening pilot opening-up programs. As a result, foreign direct investment is expected to remain stable. At the same time, exports will continue to underpin China’s balance of payments, supported by robust external demand linked to investment across the AI supply chain, continued diversification of export markets and China’s competitive advantages in new-energy manufacturing and comprehensive industrial supply chains.

China's foreign exchange reserves rose by USD31.7 billion in May, up 0.93%, according to data released by the State Administration of Foreign Exchange (SAFE). The increase mainly reflected positive valuation effects from asset-price gains driven by monetary policy developments, an expert told Securities Daily. Wang Qing, chief macro analyst at Golden Credit Rating International, said rising global equity markets in May largely offset the impact of a stronger U.S. dollar and boosted the overall valuation of China's foreign exchange reserves.