MNI China Daily Summary: Friday, January 21

LIQUIDITY: The People's Bank of China (PBOC) injected CNY100 billion via 7-day reverse repos with the rate unchanged at 2.1%. The operation has led to a net injection of CNY90 billion after offsetting the maturity of CNY10 billion repos today, according to Wind Information. The operation aims to keep liquidity reasonable and ample, the PBOC said on its website.

POLICY: China is watching for any "spillover effect" of a sharp turn in the Federal Reserve's policy settings in the emerging markets, two high-ranked government advisors told reporters in a briefing on Friday, as they called for closer policy coordination between China and the U.S.

POLICY: China will ramp up fiscal and monetary stimulus if needed to ensure the economy grows at about 5.5% in 2022, and Beijing will not allow the property sector to suffer a long-term slump, high-ranking policy advisors told reporters at a briefing on Friday.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) decreased to 2.1057% from the close of 2.1104% on Thursday, Wind Information showed. The overnight repo average rose to 2.0489% from the previous 2.0446%.

YUAN: The currency strengthened to 6.3397 against the dollar from 6.3421 on Thursday. The PBOC set the dollar-yuan central parity rate higher at 6.3492 on Friday, compared with 6.3485 set on Thursday.

BONDS: The yield on the 10-year China Government Bond was last at 2.7525%, down from 2.7700% of Thursday's close, according to Wind Information.

STOCKS: The Shanghai Composite Index lost 0.91% to 3,522.57, while the CSI300 fell 0.92% to 4,779.31. The Hong Kong's Hang Seng Index edged up 0.05% to 24,965.55.

FROM THE PRESS: The Chinese yuan is expected to remain stable in H1 2022 supported by continued high exports growth, while the impact from narrowing China-U.S. interest spread and the Federal Reserve’s upcoming tightening will be limited, the Securities Daily reported citing Ming Ming, deputy research head of CITIC Securities. Though the yuan may face depreciation pressure in H2 as overseas production capacity recovers and the Fed hikes rates further, the risk of capital outflow will remain limited given China's controls over capital accounts, said Ming. The offshore yuan has increased by 0.21% against the dollar so far this year, despite China-U.S. interest spread falling back within 100 bps for the first time since May 2019, the newspaper said.

China’s Guangdong province said it has cleaned up off-balance-sheet implicit debts, three months after launching China's pilot “zero implicit debt” program, Caixin reported. The provincial government has offered more financial support to cities and counties, halted some projects, converted some implicit debt to corporate debt, and issued refinancing bonds to roll over some maturing implicit debts, the newspaper said. Currently, Shanghai and Beijing are also carrying out this pilot program to eliminate implicit debt risks, known as “grey rhinoceros” that endanger the Chinese economy, the newspaper said.

Chinese commercial banks in major cities have accelerated mortgage lending, with rates in Guangzhou and Shenzhen declining, the China Securities Journal reported. Real estate markets in China's largest cities have stabilized following the 5-bp cut to the five-year benchmark Loan Prime Rate, on which lenders base their mortgage lending, the newspaper said citing Zhang Dawei, chief analyst of Centaline Property. Compared to the 10 bps cut to one-year LPR, the smaller cut to the rate of longer-term lending signals policymakers’ intention of not stoking the property market, the newspaper cited Zhang as saying.