MNI China Daily Summary: Tuesday, June 3

DATA: China's Caixin manufacturing PMI came in at 48.3 in May, down from April's 50.4, falling into the contraction zone below the 50 mark for the first time since October 2024, the financial publisher said.

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY454.5 billion via 7-day reverse repos, with the rate unchanged at 1.40%. The operation led to a net drain of CNY375.5 billion after offsetting the maturities of CNY830 billion today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) decreased to 1.5496% from 1.6645%, Wind Information showed. The overnight repo average fell to 1.4137% from 1.4822%.

YUAN: The currency strengthened to 7.1895 against the dollar from the previous 7.1953. The PBOC set the dollar-yuan central parity rate higher at 7.1869, compared with 7.1848 set before Dragon Boat Festival. The fixing was estimated at 7.1732 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 1.7225%, up from the previous close of 1.6975% previously, according to chinamoney.com.cn.

STOCKS: The Shanghai Composite Index rose by 0.43% to 3,361.98, while the CSI300 index was up 0.31% at 3,852.01. The Hang Seng Index gained 1.53% at 23,512.49.

FROM THE PRESS: Interbank market liquidity will remain loose in June following the PBOC’s reserve requirement ratio cut and increased medium-term lending facility rollover in May, Economic Information Daily reported citing analysts’ expectations. However, liquidity could fluctuate given increased fiscal spending at the end of the month, said Ming Ming, chief economist at CITIC Securities. Analysts should track the intensity of central bank’s liquidity support closely as recent deposit rate cuts may further exacerbate the migration towards wealth management products, Ming added.

The U.S. has successively introduced discriminatory measures against China since the Geneva talks, gravely undermining the hard-won trade consensus reached by both sides, a Ministry of Commerce spokesperson said. The U.S. has issued export control guidelines for AI chips, halted the sale of chip design software and announced the revocation of Chinese students’ visas, the ministry noted. Beijing firmly rejects it has violated the consensus and will take strong measures to defend its legitimate rights if the U.S. insists on going its own way, the ministry added.

China’s manufacturing PMI of 49.5 in May, up 0.5 percentage points m/m, shows the intensified proactive macroeconomic policies have begun to take effect, according to Zhang Liqun, a special analyst at the China Federation of Logistics and Purchasing. However, Wen Tao, an analyst at the China Logistics Information Center, said future trends still need observing as foreign trade remains uncertain. Multiple measures are needed to expand domestic demand and boost economic momentum, Wen added.