MNI China Daily Summary: Thursday, December 17

POLICY: Beijing will handle Australia's decision to act against China through the World Trade Organization over anti-dumping and anti-subsidy duties on imported Australian barley through the proper dispute settlement procedures, said Gao Feng, spokesman of the Ministry of Commerce at a briefing today, adding regret at Canberra's decision to take action.

LIQUIDITY: The People's Bank of China (PBOC) injected CNY10 billion via 7-day reverse repos with rates unchanged at 2.2%. This keeps the liquidity unchanged after offsetting the maturity of CNY10 billion repos today, 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) rose to 1.8898% from the 1.6289% on Wednesday, Wind Information showed. The overnight repo average increase to 1.3658% from the previous 0.9673%.

YUAN: The currency strengthened to 6.5335 against the dollar from 6.5378 on Wednesday. The PBOC set the dollar-yuan central parity rate slightly higher at 6.5362, compared with the 6.5355 set on Wednesday.

BONDS: The yield on 10-year China Government Bond was last at 3.2925%, up from Wednesday's 3.2850%, according to Wind Information.

STOCKS: The Shanghai Composite Index rallied 1.13% to 3,404.87, while the CSI300 index increased by 1.28% to 5,017.48. Hang Seng Index edged up 0.82% to 26,678.38.

FROM THE PRESS: The yuan may be on a continuing phase of appreciation against the dollar given China's strong exports and monetary policies, the China Securities Journal reported citing analysts. The yuan continues to derive support from the stronger economy while the dollar index has weakened since Dec. 9, the Journal said. The PBOC's recent MLF operations and peripheral adjustments may slow but not reverse the overall rising trend, the report said.

The number of defaults on SOE-issued bonds may rise as the government encourages market-based solutions for troubled companies, the Securities Daily reported citing Li Chang, an analyst from S&P Global Ratings. The widening spreads on new bonds issued by SOEs could raise the financing costs for weaker SOEs, who could potentially default amid a period of tightening monetary policy, Li said.

Australia should treat its WTO complaint on China's barley tariffs as a real trade dispute rather than politicizing the issue and planning a counterattack on China through the iron ore trade, the Global Times said in an editorial. Australia has been destroying its relations with China to show its loyalty and commitment to its alliance with the U.S., but China is confident it can disregard relations with Australia and win the barley dispute at the WTO, the newspaper said.