Lewis Porylo

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY7 billion via 7-day reverse repos, with the rate unchanged at 1.4%. The operation led to a net drain of CNY150.5 billion after offsetting the maturity of CNY157.5 billion 7-day reverse repos today, according to Wind Information.RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.3879% from 1.4030%, Wind Information showed. The overnight repo average increased to 1.3677% from 1.3524%.YUAN: The currency weakened to 6.7925 against the dollar from the previous 6.7804. The PBOC set the dollar-yuan central parity rate higher at 6.8066, compared with 6.8047 set on Friday. The fixing was estimated at 6.7856 by Bloomberg survey today.BONDS: The yield on 10-year China Government Bonds was last at 1.7300%, down from the previous close of 1.7350%, according to Wind Information.STOCKS: The Shanghai Composite Index edged down 0.06% to 4,041.24, while the CSI300 index closed flat at 4,842.00. The Hang Seng Index gained 1.14% to 23,616.32.FROM THE PRESS: China's adjustment to the vehicle and vessel tax-a type of annual ownership tax-for energy-efficient and new energy vehicles marks a milestone in the country's push to give fuel and electric vehicles equal regulatory treatment, said Cui Dongshu, secretary general of the China Passenger Car Association (CPCA). He said the move accelerates the new energy vehicle industry transition from policy-driven growth to a mature, market-based stage and supports the long-term shift toward full electrification. Effective Jan. 1, 2027, China will abolish the 50% vehicle and vessel tax reduction for energy-efficient vehicles while fully battery-electric passenger cars will remain exempt. (Source: Yicai)Strategic competition among major powers and the winner-takes-all nature of technological development make policy responses to China's K-shaped recovery increasingly complex, Liu Yuanchun, president of Shanghai University of Finance and Economics, said. He argued that macroeconomic policy should look beyond short-term measures to boost domestic demand and instead prioritise technological innovation, using new supply to generate new demand while adapting to the structural features of the K-shaped recovery. Liu also warned that the recovery carries dual risks, including asset bubbles on the upside and debt risks on the downside, while the transition could generate spillover effects on employment, income distribution, and social stability. (Source: Yicai)China's Logistics Prosperity Index rose to 50.6% in June from 50.3% in May, extending its expansion, the China Federation of Logistics and Purchasing (CFLP) said. Nine of the index's 12 sub-indices remained in expansion territory. The business volume index climbed 0.3 percentage point to 50.6%, while the new orders index edged up 0.1 percentage point to 50.3%, with both posting month-on-month gains for several consecutive months. The fixed asset investment completion index rose 0.2 percentage point to 54.3% in June. (Source: 21st Century Business Herald)

MNI picks keys stories from today's China press

China's budget revenue remains weak despite an improvement so far this year according to local economists.

MNI picks keys stories from today's China press

Chinese analysts share their outlook for H2 electricity consumption.

MNI picks keys stories from today's China press

MNI's key exclusive stories for this week

LIQUIDITY: The PBOC conducted CNY224 billion via seven-day reverse repos, with the rate unchanged at 1.40%. The operation led to a net injection of CNY217 billion after offsetting maturities of CNY7 billion seven-day reverse repos today, according to Wind Information.RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) rose to 1.4021% from 1.3886%, Wind Information showed. The overnight repo average increased to 1.3722% from 1.3591%.YUAN: The currency weakened to 6.7817 against the dollar from the previous 6.7784. The PBOC set the dollar-yuan central parity rate lower at 6.7972, compared with 6.7989 set on Friday. The fixing was estimated at 6.7847 by a Bloomberg survey today.BONDS: The yield on the 10-year China government bond was last at 1.7300%, unchanged from the previous close, according to Wind Information.STOCKS: The Shanghai Composite Index fell 2.06% to 3,913.79, while the CSI300 index decreased 1.79% to 4,695.38. The Hang Seng Index rallied 0.16% to 24,213.72.FROM THE PRESS: The average forecast of Q2 GDP growth is 4.5%, according to a survey by Yicai, noting additional policies are expected in the second half of the year as the economy suffers from "K-shaped differentiation." Authorities may significantly strengthen fiscal policy in H2, together with structural monetary policy tools and corresponding reforms, analysts said. However, breaking the deadlock of "K-shaped divergence" must rely on institutional reforms and technological innovation to improve total factor productivity, which should include reform of the fiscal and taxation system and higher proportion of labour compensation in the initial distribution of income, said Ming Ming, chief economist of CITIC Securities.Authorities will support eligible high-quality retail enterprises to go public, and to issue asset-backed securities and commercial property investment trusts, Securities Daily reported citing a document by the Ministry of Commerce and eight other departments. Retail companies have found it difficult to obtain reasonable pricing in the capital market due to their relatively traditional profit models and the fact that their asset compliance and industry valuation systems are not well-suited to go public, the newspaper said citing analysts. There are a total of 95 A-share listed retail companies, accounting for 1.72% of the total number of listed companies in the market, Wind data shows.China will address the shortcomings in distribution infrastructure, build a distribution network for important commodities and further reduce logistics costs, Economic Information Daily reported citing the State Council executive meeting. By 2025, the ratio of total social logistics costs to GDP dropped to 13.9%, falling below 14% for the first time.

China remains well positioned to achieve its annual GDP target of 4.5-5.0%, despite growth slowing to 4.3% in Q2, Mao Shengyong, deputy director of the National Bureau of Statistics, told reporters on Wednesday.The central government will take targeted and proactive measures in H2 to promote innovation-led and high quality development, Mao added.China will likely introduce additional policy support in the second half to achieve the upper end of the government's 4.5-5.0% annual growth target amid export uncertainty and weaker consumption, and investment, advisors recently told MNI. (See MNI China's Slower Q2 GDP Points To More Pro-growth Measures: https://www.mnimarkets/articles/mni-chinas-slower-q2-gdp-points-to-more-pro -growth-measures-1784004039414)

The yuan is likely to fluctuate in both directions in the period ahead as appreciation and depreciation factors persist, People's Bank of China Deputy Governor Zou Lan said on Wednesday.Chinese officials will allow market forces to play a decisive role in determining the exchange rate while maintaining the yuan's basic stability at a reasonable and balanced level, Zou told reporters. The yuan is currently trading at about 6.8 per U.S. dollar, around the median level of recent years, Zou said.China is likely to introduce additional stimulus measures including new special treasury issuance by as early as the Politburo meeting at the end of this month, a leading policy advisor told MNI. (See MNI EM INTERVIEW: China Likely To Announce New Fiscal Stimulus: https://www.mnimarkets/articles/mni-interview-china-likely-to-announce-new- fiscal-stimulus-1783584458169)