MNI China Daily Summary: Tuesday, July 15

DATA: The Chinese economy grew by 5.2% y/y in Q2, marginally outperformaing market expectations of 5.1%, according to data released by the National Bureau of Statistics (NBS). Retail sales slowed to 4.8% y/y in June from May's 6.4% growth, marking a four-month low and missing the 5.3% forecast. Industrial production increased 6.8% y/y in June to hit a three-month high, up from May's 5.8% growth and above the expected 5.6%. Fixed-asset investment decelerated for the fourth month to 2.8% y/y in H1, compared to the 3.7% reading in the Jan-May period, underperforming expectations of 3.6%.

POLICY: China’s CPI is expected to rise moderately in H2, following June's 0.1% change, according to Sheng Laiyun, NBS spokesperson, citing positive economic trends and the increasing effectiveness of demand boosting policies.

POLICY: China will accelerate the development of a new model for real estate, promoting the renovation of urban villages and dilapidated houses, according to the Central Urban Work Conference held in Beijing during the past two days, the state-run CCTV News reported. 

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY342.5 billion via 7-day reverse repos, with the rate unchanged at 1.40%. The operation led to a net injection of CNY273.5 billion after offsetting the maturity of CNY69 reverse repo today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) increased to 1.5696% from 1.5360%, Wind Information showed. The overnight repo average rose to 1.5300% from 1.4240%.

YUAN: The currency weakened to 7.1734 against the dollar from the previous 7.1693. The PBOC set the dollar-yuan central parity rate higher at 7.14918, compared with 7.1491 set on Monday. The fixing was estimated at 7.1740 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 1.6550%, down from the previous close of 1.6665%, according to chinamoney.com.cn.

STOCKS: The Shanghai Composite Index fell by 0.42% to 3,505.00, while the CSI300 index was up 0.03% at 4,019.06. The Hang Seng Index gained 1.60% at 24,590.12.

FROM THE PRESS: The yuan is expected to remain strong in the second half, supported by China’s economic resilience and the rising possibility of Federal Reserve cuts amid growing pressure from U.S. President Donald Trump, wrote Xiao Yu, associate researcher at the Chinese Academy of Social Sciences, in a commentary. Xiao noted that U.S. tariff policy could cause great uncertainty in the dollar. Xiao said international capital was optimistic about the yuan, highlighting the offshore yuan had increased about 2.5% in the past six months, higher than the 1.8% rise in the onshore yuan. (Source: 21st Century Business Herald)

China should allow local governments to tap into future bond quotas to proactively address off-balance sheet debt, analysts told Yicai.com. In the first half of the year, approximately 81% of the 2025 quota for resolving implicit debt was utilised, equivalent to CNY2.26 trillion in government bonds, the outlet reported. With only CNY539 billion remaining under this year’s quota, analysts suggest leveraging future quotas, which stand at CNY2.8 trillion in 2026 and CNY800 billion each in 2027 and 2028.

China saw 5.62 million new energy vehicle registrations in the first half, an increase of 27.9% y/y, setting a record high, Economic Information Daily reported, citing data by the Ministry of Public Security. Nationwide car ownership reached 359 million by the end of June, with electric vehicles accounting for 10.3% of the total, the newspaper said.