MNI China Daily Summary: Thursday, July 10

POLICY: The EU needs “less accusations and more communication” with China if the two sides are to expand two-way market access, strengthen government procurement and deepen supply chain cooperation, according to He Yongqian, spokesperson for the Ministry of Commerce.

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY90 billion via 7-day reverse repos, with the rate unchanged at 1.40%. The operation led to a net injection of CNY32.8 billion after offsetting the maturity of CNY57.2 reverse repo today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) rose to 1.4945% on Thursday from 1.4767% previously, Wind Information showed. The overnight repo average increased to 1.3227% from the previous 1.3171%.

YUAN: The currency strengthened to 7.1776 against the dollar, from 7.1824 at Wednesday's close. The PBOC set the dollar-yuan central parity rate lower at 7.1510, compared with 7.1541 set on Wednesday. The fixing was estimated at 7.1794 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 1.6100%, up from Wednesday's close of 1.5925%, according to Wind Information.

STOCKS: The Shanghai Composite Index gained 0.48% to 3,509.68, while the CSI300 index rallied 0.47% to 4,010.02. The Hang Seng Index rose 0.57% to 24,028.37.

FROM THE PRESS: China’s consumer price index could turn negative in July due to base effects, after June’s rebound to 0.1%, ending four consecutive months of decline, Yicai.com reported, citing Wang Qing, analyst at Golden Credit Rating, who predicted a CPI print of -0.2% next month. Exporters’ redirection of sales to the domestic market risks downward pressure, while the consumer goods trade-in scheme will continue to provide support, he noted. Authorities see the promotion of prices as an important policy goal in the second half of the year, which opens space for additional fiscal stimulus to boost consumption, as well as an interest rate cut, he said.

China’s demand for e-commerce logistics may slightly decline in the short-term as mid-year promotional activities come to an end, industry analysts told Securities Daily. China's E-commerce Logistics Index reached 111.8 points in June, rising for four consecutive months, with the total business volume sub-index at 130.8 points, up 0.6 points from May. An analyst from the China Logistics Information Centre said consumer enthusiasm for online shopping surged in June given the combined promotion of government subsidies and the June 18 promotional event.

Authorities will likely introduce reserve policies in a timely manner in accordance with situational changes, having kept room for additional special treasury and policy-based financial instruments, as well as the potential for more local government special bonds to buy up unsold homes and vacant land, Shanghai Securities News reported, citing analysts. The government retains over CNY7 trillion of its fiscal quota unused for the second half of the year, including CNY4.03 trillion from the budget deficit, CNY2.24 trillion from local special bonds, and CNY745 billion from ultra-long-term special treasuries, the newspaper said, citing Wen Bin, chief economist of China Minsheng Bank.