MNI China Daily Summary: Monday, Jan 4

POLICY: The People's Bank of China has relaxed the rules over foreign investors' ability to reinvest yuan income in the country, although they are still barred from buying securities without express permission or purchasing properties not being used by themselves, a statement published by the central bank Monday said.

LIQUIDITY: The People's Bank of China (PBOC) injected CNY20 billion via 7-day reverse repos with the rate unchanged on Monday. This resulted in a net drain of CNY140 billion given the maturity of CNY160 billion of reverse repos today, according to Wind Information. The operations aim to maintain the liquidity in the banking system reasonable and ample, the PBOC said on its website.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) dropped to 1.8552% from 2.4565% for last Thursday, Wind Information showed. The overnight repo average increased to 0.8620% from the previous 1.1003%.

YUAN: The currency jumped 770 bps to 6.4628 against the dollar from 6.5398 last Thursday. The PBOC set the dollar-yuan central parity rate higher at 6.5408 compared with the 6.5249 on last Thursday.

BONDS: The yield on the 10-year China Government Bond was last at 3.2150%, up from Thursday's 3.1775%, according to Wind Information.

STOCKS: The Shanghai Composite Index gained 0.86% to 3,502.96, while the CSI300 index increased 1.08% to 5,267.72. The Hang Seng Index increased by 0.89% to 27472.81.

FROM THE PRESS: The yuan may not be as strong as the market has predicted because developed economies are likely to recover following vaccinations against Covid-19 and China's exports growth may also decline, Sina.com reported citing Guan Tao, an economist with BOC International Securities and a former official with China's central bank. Citing another view, Sina reported comments from Haibin Zhu, the chief economist with JP Morgan, who said the yuan will maintain a strong trend through the first half of 2021 and surge past 6.25 yuan by the year end.

The U.S. will cause damage to the rights of global investors and undermine faith in its capital markets by punishing Chinese companies, the Ministry of Commerce said last week following the New York Stock Exchange's delisting of China Mobile, China Telecommunications and China Unicom. The measures will have a limited impact on the financing and operations of the three companies as the percentage of stocks listed and traded in the U.S. is small, the Securities Times reported citing Shen Meng, the executive director at Chanson Capital.

U.S. hardliners displayed their cold war mentality when they fretted over China's investment deal with the EU before seeing its content, the China Daily said in an editorial. The U.S. is sacrificing other countries' interests to serve its strategy when it asks them to decouple from China, and such a policy is doomed to fail, the newspaper said. The U.S. should focus on improving its leadership and not obstruct other countries' development, the editorial said.