China’s government is easing rules that give preference to domestic products for government procurement, a move that could eventually open up billions of dollars in contracts to foreign firms. The Finance Ministry said that starting on July 1, it would “stop enforcing” three rules related to its procurement process, though it did not provide specific details. Over the past years the Chinese government has sought to boost “indigenous innovation” by requiring the government to buy products that feature Chinese intellectual property, a regulation that has emerged as a major source of trade friction between the US and China. The US-China Business Council lauded the Finance Ministry’s decision as “an important development” while noting that the new measures “represent only a portion of the full list of regulations that tie indigenous innovation and government procurement.” Foreign firms have long complained that China’s indigenous-innovation policies fly in the face of the country’s stated commitment to resist protectionism. However, China has never signed on to the World Trade Organization’s voluntary Agreement on Government Procurement that forbids discrimination against foreign companies in government procurement.


Hong Kong and Shanghai shares made strong gains on the last day of June, though the markets posted significant losses in the second quarter. The Hang Seng Index gained 1.5 percent to 22,398.1 on Thursday, though the index retreated 4.8 percent in the second quarter. The Shanghai Composite Index gained 1.2 percent to 2,762.1 points on Thursday for a 5.7 percent second-quarter loss. Hong Kong and Shanghai markets have been weighed down by rising inflation, government measures to slow growth on the mainland and reports of corporate malfeasance at Chinese firms.


The Bank of China, one of the country’s “big four” banking giants, said that China’s banking sector faces limited risk of defaults from local governments. Local governments have borrowed heavily for projects over the past few years and nearly 80 percent of that funding came from banks, leading to concerns of a wave of future defaults. But Bank of China’s chief economist said Chinese banks have set aside enough provisions to protect against potential defaults. Lenders can also adjust the structure of some loans to match projects’ cash flow patterns if necessary. He added that the chances of massive defaults are low, as the majority of local government projects can generate sustainable cash flows.


India’s merchandise exports rose 56.9 percent year over year in May to USD25.9 billion. May’s exports bring India’s total exports for the first two months of the current fiscal year to USD49.8 billion, a 45.3 percent increase over the previous year. Imports rose 54.1 percent year over year to USD40.9 billion on the back of a sharp increase in non-oil imports. These imports increased by 71 percent to USD30.75 billion. India’s trade deficit in May rose 49.4 percent year over year to 14.9 billion. This compares to a 18.5 percent decline in the trade deficit in April.