MNI China Press Digest Aug 5: CPI, Service Trade, VAT Bonds

Highlights from Chinese press reports on Tuesday:

• China’s CPI is expected to reach 0.16% m/m in July, but fall to -0.45% y/y due to base effects, according to Ming Ming, chief economist at CITIC Securities. According to a CICC report, July’s CPI is anticipated to hit -0.2% y/y, weakening from 0.1% in June due to declining food prices. A Huachuang Securities report predicts a 0.4% m/m drop in food prices, mainly due to increased seasonal supply of fruit and decreased egg consumption, affected by higher production and hot, rainy weather. Regarding PPI, Ming Ming said the anti-involution strategy had increased the prices of major industrial products like steel, coal, and non-ferrous metals. July’s PPI is expected to rise 0.18% m/m and -2.79% y/y. (Source: Securities Daily)
• China’s total value of service trade reached CNY3.8 trillion in H1, an increase of 8.0% y/y, of which exports totalled CNY1.6 trillion, up 15.0%, with imports reaching CNY2.1 trillion, up 3.2% y/y, data from the Ministry of Commerce showed. The service trade deficit stood at CNY510 billion, narrowing by CNY152.2 billion compared to the same period last year. Liu Xiangdong, deputy director at the China Center for International Economic Exchanges, said China’s service trade will likely maintain stable growth, especially in travel and knowledge-intensive sectors.
• China's recent decision to impose value-added tax (VAT) on interest income from newly issued treasury bonds, local government bonds and financial bonds is projected to generate approximately CNY208.6 billion in additional fiscal revenue between 2025 and 2027, according to estimates by Caitong Securities. Industry analyses indicates that the applicable VAT rate will be 6% for banks’ proprietary investments in government and financial bonds and 3% for asset management products. The previous tax-exempt status of mutual funds may be eliminated under the new regime, while interbank certificates of deposit will remain exempt for the time being. (Source: Yicai)