MNI China Daily Summary: Monday, December 13

LIQUIDITY: The People's Bank of China (PBOC) injected CNY10 billion via 7-day reverse repos with the rate unchanged at 2.2%. This keeps the liquidity unchanged 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.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) rose to 2.1768% from 2.1411% on Friday, Wind Information showed. The overnight repo average increased to 2.1082% from the previous 1.8031%.

YUAN: The currency strengthened to 6.3631 against the dollar from 6.3704 on Friday. The PBOC set the dollar-yuan central parity rate lower at 6.3669, compared with the 6.3702 set on Friday.

BONDS: The yield on 10-year China Government Bond was last at 2.9050%, up from Friday's close of 2.8925%, according to Wind Information.

STOCKS: The Shanghai Composite Index edged up 0.40% to 3,681.08 while the CSI300 index gained 0.57% to 5,083.80. Hang Seng Index fell 0.17% to 23,954.58.

FROM THE PRESS: China’s central and regional authorities are asked to implement policies that are “forward-leading” and help keep the economy stable, Han Wenxiu, the deputy director of the Central Financial and Economic Affairs Commission, said in a forum on Dec. 11, Yicai.com reported. Han commented on the concluded Central Economic Work Conference. China will be “prudent” when introducing any policies that may cause economic contraction, nor will it let long-term goals and non-economic policies affect short-term growth, according to the spirit of the conference. While China faces a considerable number of risks, they are overall controllable, said Han. Fiscal and monetary policies must be coordinated that integrate “cross-cycle” and countercyclical policies, Han said.

China will clarify areas banned from capital investment to guide the flow of capital and ensure healthy development, said Economic Daily in a commentary following the Central Economic Work Conference last week which emphasized strengthening supervision of capital. China should improve the legal system to prevent the disorderly expansion of capital especially in the areas of anti-monopoly, data information protection and financial supervision, the newspaper said. It is also necessary to uphold the basic socialist economic system, consolidate and develop the state-owned economy, and encourage, support, and guide the development of the private ownership economy, the newspaper said.

China should further develop domestic foreign exchange market to help stabilize the yuan, especially by expanding private foreign investment channels, allowing more cross-border capital to conduct currency exchanges in China, and strengthening the onshore yuan’s use in financial settlements, wrote Guan Tao, global chief economist at BOC International, in an article published on Yicai.com. The PBOC will not interfere with the specific level of the yuan as it has basically exited normal intervention of the FX market, but its main task is to avoid excessive and abnormal fluctuation of the yuan and manage market expectation, said Guan. The PBOC’s hike to FX deposit reserve requirement ratio by 2 percentage points last week signaled increasing regulations to the currency as the recent appreciation of yuan was seen as excessive and could affect the export competitiveness of companies, said Guan, adding that the yuan has been a stronger currency than the U.S. dollar this year.