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POLICY: China should stem systemic financial risks by applying comprehensive supervision of commercial banks, including stricter standards of information disclosure, the People's Bank of China said in a working paper released today. The recent increase in bond defaults and the failure of Baoshang Bank indicated problems of illegal use of funds and more risk taking, and the lack of proper disclosure may be to blame, according to the document.

LIQUIDITY: The PBOC injected CNY20 billion via 7-day reverse repos with the rate unchanged. This resulted in a net injection of CNY10 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) fell to 2.0772% from the 2.1563% last Friday, Wind Information showed. The overnight repo average decreased to 0.6485% from the previous 0.7609%.

YUAN: The currency weakened to 6.5375 against the dollar from 6.5241 last Friday. The PBOC set the dollar-yuan central parity rate lower at 6.5236, compared with the 6.5333 set last Friday.

BONDS: The yield on the 10-year China Government Bond was last at 3.2025%, down from last Friday's 3.2200%, according to Wind Information.

STOCKS: The Shanghai Composite Index edged up 0.02% to 3,397.29, while the CSI300 index gained 0.44% to 5,064.41. Hang Seng Index lost 0.27% to 26,314.63.

FROM THE PRESS: China's GDP is projected at 8% growth in 2021 given that 2020 is a low base for comparison, the China Securities Journal reported citing Zhu Baoliang, the chief economist from the State Information Center of China. Infrastructure will continue to receive a funding boost given this year's unused balance from the special bond issuances will be allowed to be used as project capital, Zhu said. Retail sales may gain 12% growth in 2021 as vaccines enable further movement and as incomes rebound, Zhu said. Export growth in H1 of 2021 should remain high as China's competitors remain constrained by the pandemic, the newspaper reported citing Hua Changchun, chief economist from Guotai Junan Securities.

China's top securities regulator will continue to increase the supervision of securities and financial service institutions linked with Ant Group, the Securities Times reported citing unidentified sources. PBOC Deputy Governor Pan Gongsheng said Ant Group must return to its online payment business, and that fintech companies must serve the real economy and comply with prudential supervision. Future supervision will focus on breaking monopolies and enforcing licensing compliance, according to a statement on the PBOC website on Sunday.

China should curb the rapid rise of personal debt levels after the overall macro leverage ratio ballooned to 270.1% this year by the end of Q3, up 24.7 percentage points from the end of 2019, the Economic Information Daily wrote citing data from the National Institution for Finance and Development. China should increase alternative housing supply to stabilize home prices and stop rapid rise in mortgage debts, wrote the newspaper. Consumer demand shouldn't be at the expense of surging consumer debt, the Daily wrote, and China should improve healthcare, living support and other aspects of the social safety net.