MNI China Daily Summary: Friday, December 16

LIQUIDITY: The People's Bank of China (PBOC) injected CNY41 billion via 7-day reverse repos with the rates unchanged at 2.00%. The operation led to a net injection of CNY39 billion after offsetting the maturity of CNY2 billion reverse repos today, according to Wind Information. The operation aims to keep liquidity reasonable and ample, the PBOC said on its website.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) increased to 1.7325% from 1.4846% on Thursday, Wind Information showed. The overnight repo average fell to 1.2150% from the previous 1.2200%.

YUAN: The currency weakened to 6.9716 against the dollar from 6.9690 on Thursday. The PBOC set the dollar-yuan central parity rate higher at 6.9791, compared with 6.9343 set on Thursday.

BONDS: The yield on 10-year China Government Bonds was last at 2.9080%, down from Thursday's close of 2.9150%, according to Wind Information.

STOCKS: The Shanghai Composite Index edged down 0.02% to 3,167.86 while the CSI300 index gained 0.06% to 3,954.23. The Hang Seng Index rose 0.42% to 19,450.67.

FROM THE PRESS: The 5-year Loan Prime Rate could be lowered at the December 20th fixing, according to the Securities Daily. The recent lowering of deposit rates by banks, coupled with a cut to the reserve requirement ratio last month, may lead to a lower 5-year LPR, the newspaper said. The 1-year LPR is likely to remain stable this month, given the current corporate loan rate is lower than housing loan rates, and various structural support policy tools have provided abundant liquidity. The PBOC's Medium-Term Lending Facility injection in December, coupled with the use of tools such as Pledged Supplementary Lending, will help control banks’ marginal capital costs and support an increase in credit to the real economy, the paper said.

China’s economy could remain weak until the end of Q1 next year, as disruption from Covid-reopening will suppress demand and business activity in the short term, according to the 21st Century Business Herald. The sudden reopening might lead to labor shortages and reduced levels of consumption from people going out less, but analysts remain divided on how long the disruption will last. The paper cites the government's recent Outline of the Strategic Plan for Expanding Domestic Demand (2022-2035) as evidence policy will be focused on boosting consumption and investment in the near term. The economy is predicted to grow by 3% this year before rebounding to above 5% next year, the paper said.