MNI China Daily Summary: Wednesday, December 23

LIQUIDITY: China's interbank market saw relatively loose liquidity conditions through December as the People's Bank of China kept the funds flowing to ensure no slowdown in available credit for companies and ample cash going into the calendar year end, the latest MNI Liquidity Conditions Index shows. The Liquidity Condition Index fell to 15.7 in December after November's 43.8, with 68.8% respondents reporting looser conditions, matching levels seen earlier this year when the central bank injected liquidity soon after the outbreak of Covid-19.

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) decreased to 1.6478% from the close of 1.8860% on Tuesday, Wind Information showed. The overnight repo average fell to 0.5878% from the previous 0.9696%.

YUAN: The currency strengthened to 6.5378 against the dollar from 6.5480 on Tuesday. The PBOC set the dollar-yuan central parity rate slightly higher at 6.5558, compared with the 6.5387 set on Tuesday.

BONDS: The yield on the 10-year China Government Bond was last at 3.2400%, flat from Tuesday's close, according to Wind Information.

STOCKS: The Shanghai Composite Index edged up 0.76% to 3,382.32, while the CSI300 index increased by 0.85% to 5,007.12. Hang Seng Index rose 0.86% to 26,343.10.

FROM THE PRESS: China will extend policies offering loan payment deferrals to small private businesses into Q1 next year and continue credit support, the State Council said in a statement following an executive meeting. Banks and SME borrowers should negotiate to extend payments beyond Q1, the statement said. Qualified local banks lending to SMEs will continue to receive government funding of up to 40% of the loan principal, the government said.

China will retaliate in response to the U.S. adding 58 Chinese firms to its "Military End User" list, the Ministry of Commerce said late on Tuesday. Companies included in the MEU list, many in the aviation sector, will be blocked from buying U.S. technology, MNI noted. China urges the U.S. to stop unilateral and bullying practices and give fair treatment to companies from all countries, the ministry said.

China is banning local governments from raising off-balance sheet debt in the form of corporate debt, or through illegal financing with financial institutions, wrote Minister of Finance Liu Kun in the People's Daily. China will advance its debt-ratio based local government risk assessment systems and solvency tests to strengthen risk prevention, Liu wrote. China will improve the direct tax system centered on income and property taxes, and increase their proportion in total tax revenue, wrote Liu.