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TOP NEWS: Canada had surrendered to the 'ugly politics' of the U.S. with
the arrest of Huawei's CFO and the move could have serious consequences for its
relations with China, the English-language official newspaper China Daily said
in an editorial. The arrest, at the behest of the U.S. and her treatment since
arrest were intended to humiliate her and China, the Daily said. The U.S. has
been pressuring other countries to limit the use of Huawei's technology, and the
latest move was a sign that it had become more aggressive, the newspaper said.
(Link to the story: https://bit.ly/2BZVBaI)
DATA: Consumer price index (CPI) was 2.2% y/y in November, decelerating
from 2.5% in October and was the smallest gain since August. Inflation in
Jan-Nov rose 2.1% from a year ago, well below the government's 3% ceiling, data
released by the National Bureau of Statistics on Sunday showed. Producers price
index (PPI) gained 2.7% in November over a year ago. It contracted 0.2% m/m,
compared with 0.4% monthly gain in October.
LIQUIDITY: The People's Bank of China (PBOC) skipped open market operations
(OMOs) for a 32nd straight trading day Monday, leaving liquidity unchanged. No
reverse repos mature today, according to Wind Information. The central bank said
the level of liquidity in the banking system is "relatively high" and can offset
the issuance of government bond and other factors.
RATE: The 7-day weighted average interbank repo rate for depository
institutions (DR007) decreased to 2.5174% from Friday's close of 2.5513%, Wind
Information showed. The overnight repo average increased to 2.4391% from
USDCNY: The yuan depreciated to 6.9135 against the U.S. dollar from
Friday's close of 6.8798. The PBOC set the dollar/yuan central parity rate at
6.8693 Monday, higher than than last Friday's 6.8664.
USDCNH: The yuan traded back up above the 6.90 level but remains below last
week's high at 6.9073, keeping the near-term outlook neutral. The yuan is
holding up in spite of the weakness seen in stocks and the continued decline in
rates. Much of the yuan's strength can be put down to dollar weakness against
the majors, although the yuan is outperforming among the region.
STOCKS: The benchmark Shanghai Composite Index closed 0.82% lower at
2,584.58. Hong Kong's Hang Seng Index decreased 1.19% to 25,752.38.
BONDS: The yield on the benchmark 10-year China Government Bond was last at
3.2700%, down from the closing price of 3.3050% on Friday, according to Wind
FROM THE PRESS: Allowing commercial banks to set interest rate themselves
in a market-based approach is a better way of easing financing difficulties for
the private sector than simply seeing the central bank cutting the benchmark
rates, China Securities Journal reported Saturday, citing Sheng Songcheng,
former director of the Survey and Statistics Department at the PBOC. With
inflation at current levels, there is little room for downward adjustment of
rates. And the benchmark loan rates which are between 4.35% and 4.9% are not
high in real terms, the newspaper said, citing Sheng. (Link to the story:
All financial activities must undergo strict market supervision, and they
musn't be hidden from regulation under the guise of technology, China Securities
Journal said Saturday, citing Pan Gongsheng, deputy governor of the People's
Bank of China. The PBOC will adopt strict supervision on financial institutions,
internet firms or fintech startups, using rules and standards consistent with
existing operations, the newspaper said citing Pan. (Link to the story:
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