MNI China Daily Summary: Thursday, January 21

POLICY: China will look expand the scope of its free trade network, hopefully bringing in Japan and South Korea, as Beijing pursues an increased opening up, said Gao Feng, spokesman for the Ministry of Commerce at a regular briefing Thursday. "China will speed up the negotiation of the China-Japan-Korea free trade agreement, promote the free trade negotiation process with the Gulf Cooperation Council, Israel and Norway, and actively consider joining the CPTPP," said Gao.

LIQUIDITY: The People's Bank of China (PBOC) injected CNY250 billion via 7-day reverse repos with the rate unchanged today. This resulted in a net injection of CNY248 billion given the maturity of CNY2 billion reverse repos today, according to Wind Information. The operation aims to offset the impact of the tax season and 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) fell to 2.4017% from the 2.5528% on Wednesday, Wind Information showed. The overnight repo average increased to 2.5913% from the previous 2.4943%.

YUAN: The currency strengthened to 6.4643 against the dollar from 6.4676 on Wednesday. The PBOC set the dollar-yuan central parity rate lower at 6.4696 today. This compares with the 6.4836 set on Wednesday.

BONDS: The yield on 10-year China Government Bond was last at 3.1800%, down from Wednesday's 3.2050%, according to Wind Information.

STOCKS: The Shanghai Composite Index rose 1.07% to 3,621.26, while the CSI300 index rallied by 1.62% to 5,564.97. Hang Seng Index edged down 0.12% to 29,927.76.

FROM THE PRESS: The PBOC may keep the loan prime rate (LPR) unchanged to help solidify reductions in corporate loan rates, the Financial News reported. China's corporate loan rates are likely to be kept low due to low inflation risks and stable macro policies, the newspaper reported citing Wang Qing, an analyst with Golden Credit Rating. The PBOC seems content with the current interest rate levels while leaving the January MLF rate unchanged, while abundant credit and demand should support recovery, the newspaper reported citing Zhou Maohua, an analyst from China Everbright Bank.

China should keep its deficit at a relatively high level in 2021 and the scale of local government special bonds at around CNY3.75 trillion to buttress against lingering uncertainties, the Economic Information Daily reported citing Yang Zhiyong, a deputy director of the National Academy of Economic Strategy under the Chinese Academy of Social Sciences. Provincial governments should have clear plans on using the bond proceeds, the newspaper said citing Yang.

The future China-U.S. relationship should be more equal and may include both reciprocity and reciprocal sanctions, the CCP owned Global Times reported citing Li Haidong, a professor from China Foreign Affairs University. China has set the tone for future relations after imposing sanctions on 28 anti-China former U.S. officials including Michael Pompeo, and urged future American politicians to respect China's core values when making and applying policies toward China, said Li. China will not allow these politicians and their associates to rake in benefits from Chinese markets if they enter the private sector, the newspaper reported citing Shen Yi, a professor from Fudan University.