MNI China Daily Summary: Friday, December 25

LIQUIDITY: The People's Bank of China (PBOC) injected CNY40 billion via 7-day reverse repos with rates unchanged at 2.2%. This resulted in a net drain of CNY20 billion given the maturity of CNY10 billion of reverse repos and CNY 50 billion of Treasury's deposits at commercial banks today, according to Wind Information. The operations aim to maintain stable liquidity at the end of the year, the PBOC said on its website.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) rose to 2.1563% from the close of 1.4336% on Thursday, Wind Information showed. The overnight repo average increased to 0.7608% from the previous 0.6046%.

YUAN: The currency strengthened to 6.5241 against the dollar from 6.5320 on Thursday. The PBOC set the dollar-yuan central parity rate slightly lower at 6.5333, compared with the 6.5361 set on Thursday.

BONDS: The yield on 10-year China Government Bond was last at 3.2200%, down from Thursday's 3.2575%, according to Wind Information.

STOCKS: The Shanghai Composite Index edged up 0.99% to 3,396.56 while the CSI300 index rose 0.84% to 5,042.01. Hong Kong stock market closed today for Christmas.

FROM THE PRESS: The PBOC will strictly forbid debt evasions and establish systematic law enforcement to plug loopholes in China's bond market supervision, said Deputy Governor Pan Gongsheng in a statement on the central bank's website dated Friday. Regulators will enhance rules and regulations, information disclosures during bankruptcies and trial rulings on bond dispute cases, Pan said in the statement.

China needs to maintain appropriate scales of deficits and debts next year as policymakers moderate fiscal spending, the China Securities Journal reported citing Liu Shangxi, the head of the Chinese Academy of Fiscal Sciences. Liu suggested to limit the scale of local government debts while boosting short-term China Government Bonds, the newspaper said. Local governments' current high debts strain their fiscal conditions and are more difficult to manage, Liu was cited as saying.

Chinese regulators should adjust supervision of fintech companies according to the sizes of their potential risk exposures and the underlying entities, the China Securities Journal reported citing former PBOC Deputy Governor Wu Xiaoling. Regulators should also urge banks to adopt new asset management rules fully before 2021, Wu was cited saying. They should prepare for localized risk events from structured finance and non-standardized debt assets, the daily reported Wu as saying.