MNI China Daily Summary: Wednesday, December 16

POLICY: China's consumer prices may remain relatively low in the short term due to the high base last year but in general, prices will remain stable as there is abundant supply of major industrial and agricultural products, said Meng Wei, spokeswoman of the National Development and Reform Commission at a briefing.

LIQUIDITY: The People's Bank of China (PBOC) injected CNY10 billion via 7-day reverse repos with rates unchanged at 2.2%. This resulted in a net drain of CNY310 billion given the maturity of CNY20 billion of reverse repos and CNY 300 billion of the medium-term lending facility (MLF) 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. MNI noted that the PBOC has conducted CNY950 billion of one-year MLF yesterday, aiming to roll over the CNY900 billion of MLFs maturing this month.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) decreased to 1.6289% from the close of 2.0108% on Tuesday, Wind Information showed. The overnight repo average fell to 0.9673% from the previous 1.3365%.

YUAN: The currency strengthened to 6.5378 against the dollar from 6.5446 on Tuesday. The PBOC set the dollar-yuan central parity rate lower at 6.5355, compared with the 6.5434 set on Tuesday.

BONDS: The yield on the 10-year China Government Bond was last at 3.2850%, down from Tuesday's 3.2900%, according to Wind Information.

STOCKS: The Shanghai Composite Index edged down 0.01% to 3,366.98, while the CSI300 index increased by 0.18% to 4,953.87. Hang Seng Index edged up 0.97% to 26,460.29.

FROM THE PRESS: China may stabilize the macro leverage ratio to better resolve risks from shadow banking, real estate and fintech companies, the 21st Century Business Herald reported citing analysts. Next year's new credit and total social financing may be capped at around CNY19 trillion and CNY32 trillion, down CNY1 trillion and CNY3 trillion from this year, the newspaper said citing Li Chao, the chief economist of Zheshang Securities. Next year's quota of local government special bonds may be reduced to CNY3 trillion from CNY3.75 trillion, according to Xue Xiaoqian, deputy director of the Government Debt Research and Evaluation Center. China's total debt as a share of GDP rose to 270.1% at the end of Q3 from 245.4% as of Dec. 31, the Herald reported.

The PBOC may be less likely to conduct wide RRR cuts in January after recent MLF operations eased a tightness following the defaults on several SOE-owned bonds and recent pressure on structured deposits, YiCai reported citing Wang Qing, an analyst with Golden Credit Rating. The central bank is unlikely to hike rates as doing so may raise financing costs and reduce investment and consumption, YiCai reported citing Yan Se, an economist from Founder Securities.

China should accelerate the implementation of legislation covering data ownership to prevent unfair competition in the use of data and technological advantage, the Economic Information Daily reported citing industry participants. China should consider digital taxes, especially on platforms with huge consumer traffic, the newspaper reported citing the former Deputy Minister of Finance Zhu Guangyao. China should also implement trading mechanisms and sharing platforms for financial data to break barriers and monopolies and strengthen the protection of personal information, the Daily reported citing Wang Zhaoxing, the former vice chairman of the China Banking and Insurance Regulatory Commission.