MNI China Daily Summary: Friday, December 24

LIQUIDITY: The People's Bank of China (PBOC) injected CNY10 billion via 7-day reverse repos and CNY10 billion via 14-day reverse repo with the rate unchanged at 2.2% and 2.35% respectively. This operation has injected net CNY10 billion after offsetting the maturity of CNY10 billion repos today, according to Wind Information. The operation aims to maintain the liquidity stable towards year-end, the PBOC said on its website.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) increased to 1.8992% from the close of 1.8924% on Thursday, Wind Information showed. The overnight repo average rose to 1.7971% from the previous 1.6145%.

YUAN: The currency strengthened to 6.3700 against the dollar from 6.3702 on Thursday. The PBOC set the dollar-yuan central parity rate higher at 6.3692, compared with 6.3651 set on Thursday.

BONDS: The yield on the 10-year China Government Bond was last at 2.8700%, up from 2.8600% of Thursday's close, according to Wind Information.

STOCKS: The Shanghai Composite Index lost 0.69% to 3,618.05, while the CSI300 fell 0.55% to 4,921.34. The Hong Kong's Hang Seng Index edged up 0.13% to 23,223.76.

FROM THE PRESS: China needs increased infrastructure investment to boost demand and stabilize growth, but it should advance high-tech infrastructure without excess and wasteful projects, the 21st Century Business Herald said in an editorial. Developing a green economy is the key to achieving carbon peak and neutrality, which demands more investment in new energy and materials, energy conservation and environmental protection while investing in 5G, industrial use of the Internet and AI will also be accelerated to promote the digital economy, the newspaper said. China has ensured sufficient funding given issuances of local government special bonds may exceed CNY3.5 trillion in 2022, the newspaper said.

The People’s Bank of China is adopting a more flexible policy approach to address the current economic downturn, judging by the recent cut to reserve requirement ratios and the refinancing rates for agricultural loans, the Economic Daily reported citing Tang Jianwei, chief researcher of the Bank of Communications. The central bank is also keeping its structural supports for SMEs, technological innovation and green development, the newspaper said citing Tang. The recent 5-bps cut to LPR will steadily reduce financing costs by lowering rates on current loans and repricing of existing loans, the newspaper said citing analysts.

China should vigorously develop the capital market and increase the proportion of direct financing, as well as promote the innovation of bank and digital finance, so to better support the steady growth of the economy next year, wrote Huang Yiping, former member of PBOC’s Monetary Policy Committee in an article published on Yicai.com. China should better support innovative SMEs to promote sustainable growth, while the credit risk assessment based on financial data and mortgage assets are unfavorable to SMEs, said Huang, urging for more support to SMEs while using digital technology and big data to assess credit risks.