MNI China Daily Summary: Monday, December 14

EXCLUSIVE: Real estate investment in China will grow at least 5% next year as land sales recover and builders, constrained by tighter financing rules, accelerate project launches and home sales to improve their cash flow, policy advisors told MNI. The area of land sold across the country fell 3.3% in the first 10 months of this year with the decline accelerating after Beijing proposed the "three red lines" rule in August linking developers' borrowing to their performance on major debt ratios. By contrast, overall property investment continued to grow, reaching 6.3% as of October, driven partly by cheap credit in the wake of the pandemic and discounted home prices.

LIQUIDITY: The People's Bank of China (PBOC) injected CNY20 billion via 7-day reverse repos with rates unchanged at 2.2% on Monday. This drained a net of CNY30 billion due to the maturity of CNY50 billion in reverse repos, according to Wind Information. The operation aims 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) dropped to 2.1003% from the 2.1281% on last Friday, Wind Information showed. The overnight repo average increased to 1.6789% from the previous 1.4223%.

YUAN: The currency strengthened to 6.5367 against the dollar from 6.5411 last Friday. The PBOC set the dollar-yuan central parity rate lower at 6.5361, compared with the 6.5405 set last Friday.

BONDS: The yield on 10-year China Government Bond was last at 3.3000%, down from last Friday's 3.3100%, according to Wind Information.

STOCKS: The Shanghai Composite Index increased 0.66% to 3,369.12, while the CSI300 index gained 0.92% to 4,889.52. Hang Seng Index lost 0.36% to 26389.52.

FROM THE PRESS: The PBOC will strive to raise the standard of rating agencies in the domestic bond market and toughen its supervision, Xinhua News Agency reported on Sunday citing Deputy Governor Pan Gongsheng. Credit rating standards need improvement as too many bonds were overrated and there is a lack of differentiation that accurately reflects the underlying risks, Pan said. MNI notes that Pan spoke after defaults by state-owned companies, perceived as low-risk given government ownership, have roiled China's financial markets in the last month.

A key task for China's leadership is to toughen rules against anti-trust practices to curtail rampant expansion and prevent financial risks, the China Securities Journal wrote in an editorial following a Dec. 11 Politburo meeting. Fintech activities need to be included into the regulatory system as soon as possible as activity in this sector can suppress competition due to data and capital advantages, the Journal said. Operations spanning different industries can introduce complex and contagious risks, and regulators must guide capital and conduct financial risk prevention, the newspaper wrote.

China should downplay ideological differences with western powers and not fall into the trap laid by the U.S., which intends to protect its hegemony, said Global Times in an editorial. China should not escalate value-based frictions with other countries but instead focus on economic interests, the newspaper said.