MNI China Daily Summary: Tuesday, December 22

EXCLUSIVE: China's consumer prices may remain in negative territory through the first quarter or even the first half of next year when the base effect of higher pork prices will start to fade and spending recovers further, policy advisors told MNI, adding that the short-lived decline is unlikely to draw any action from the central bank.

LIQUIDITY: The People's Bank of China (PBOC) injected CNY10 billion via 7-day reverse repos and CNY120 billion via 14-day reverse repos with rates unchanged. This resulted in a net injection of CNY120 billion given the maturity of CNY10 billion of reverse repos 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) dropped to 1.8860% from the 1.9282% on Monday, Wind Information showed. The overnight repo average decreased to 0.9696% from the previous 1.4349%.

YUAN: The currency strengthened to 6.5480 against the dollar from 6.5494 on Monday. The PBOC set the dollar-yuan central parity rate slightly lower at 6.5387, compared with the 6.5507 set on Monday.

BONDS: The yield on 10-year China Government Bond was last at 3.2400%, down from Monday's 3.2700%, according to Wind Information.

STOCKS: The Shanghai Composite Index dropped 1.86% to 3,356.78 while the CSI300 index fell 1.63% to 4,964.77. Hang Seng Index lost 0.71% to 26,119.25.

FROM THE PRESS: China is likely to maintain its current monetary policies into next year, while any withdrawal of pandemic-era stimulus will be done gradually, the Economic Information Daily reported, following the Central Economic Work Conference. China will maintain the stability of the yuan by aligning market rates to the PBOC's moves. China may offer refinancing to micro and small businesses, ensure stable capital flows and prevent policy mismatch, the newspaper said, citing Wen Bin, a researcher from China Minsheng Bank. The PBOC may continue to maintain liquidity through OMO/MLF operations with targeted RRR cuts to manufacturing and microlending to medium enterprises, the newspaper said, citing Tang Jianwei, a researcher with Bank of Communications.

The U.S. should return to the Joint Comprehensive Plan of Action as soon as possible and China supports multilateral talks on regional security in the Gulf, the China Daily reported, citing Foreign Minister Wang Yi's speech at a meeting about Iran's nuclear issues. China urges the U.S. to lift pressure and sanctions on Iran, which Wang said will further delay Iran's return to its nuclear commitments even as President-elect Joe Biden shows an interest in rejoining the negotiations.

The world must take coordinated action to defeat Covid-19 as the mutated version of the virus in the UK is likely to spread beyond its borders despite measures to halt flights, the Global Times said in an editorial. The UK has paid a heavy price for its unstructured anti-virus response and for believing in herd immunity, the newspaper added.