MNI China Daily Summary: Tuesday, December 8

POLICY: China will watch out for "too big to fail" technology companies as some firms have become dominant in the small-amounts digital payment market but they also operate in other financial and technology sectors, which may bring systemic risk, said Chairman Guo Shuqing of the China Banking and Insurance Regulatory Commission on Tuesday. Guo's comments at the 2020 Singapore Fintech Festival are the latest sign of the regulator's determination to strengthen its grip over technology companies' financial operations. Last month, the government halted the IPO of Alibaba's financial arm, Ant Financial, concerned by its loans businesses.

LIQUIDITY: The People's Bank of China (PBOC) injected CNY60 billion via 7-day reverse repos with rates unchanged at 2.2% on Tuesday. This resulted in a net drain of CNY40 billion given the maturity of CNY20 billion of reverse repos today, according to Wind Information. The operations aim to maintain the liquidity in the banking system at a reasonable and ample level, the PBOC said on its website.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) declined to 2.0555% from close of 2.0662% on Monday, Wind Information showed. The overnight repo average dropped to 1.2665% from the previous 1.3470%.

YUAN: The currency strengthened to 6.5320 against the dollar from 6.5382 on Monday. The PBOC set the dollar-yuan central parity rate lower for a fifth day at on 6.5320 Tuesday, compared with the 6.5362 set on Monday.

BONDS: The yield on 10-year China Government Bond was last at 3.2725%, down from Monday's 3.2900%, according to Wind Information.

STOCKS: The Shanghai Composite Index lost 0.19% to 3,410.18 while the CSI300 index decreased by 0.25% to 5,009.88. Hang Seng Index down 0.76% to 26,304.56.

FROM THE PRESS: China should maintain positive fiscal policies in 2021 to support the economy given a projected decline in land revenues and the expected further drop in tax and fee revenues, the Economic Information Daily said in a commentary. China needs to increase the size of government debt with ample liquidity, and fiscal spending should expand as the 14th Five-Year plan is implemented while social security costs rise, said the newspaper. The normalization of China's fiscal and monetary policies should be more in tune with the needs of macro-regulation, the Daily's commentary said.

The incoming Biden administration can repair the relationship with China by welcoming China's initiative of joining the CPTPP, according to a commentary published in China Daily and written by Liu Hui, a researcher at the Institute of American Studies at the Chinese Academy of Social Sciences. Liu makes the point that the predecessor of the CPTPP was led by the U.S., and he called for other positive measures such as reviving 10-year visas to boost exchange and cooperation with China on climate change. Previous cooperation between the U.S. and China had led to resolving issues around Iran's nuclear push and North Korea, and these two issues would be good starting points for improving China-U.S. relations, Liu wrote.

China is likely to maintain tight controls on the property sector and refrain from using housing development to stimulate the economy, the People's Daily reported citing Yin Zhongli, a director from the Chinese Academy of Social Sciences. In his comments, Yin was interpreting the outcome of the Real Estate Symposium held by the Ministry of Housing and Urban-Rural Development on Dec 3. He said China would continue to let local authorities develop their own approach specific to each region. China should also expand affordable housing to protect lower-income groups, Yin told the Daily.