MNI China Daily Summary: Wednesday, December 8

EXCLUSIVE: Local government special bond issuance in China is likely to remain near a record in 2022 with Beijing scouring for infrastructure investments to overcome economic headwinds, policy advisors told MNI, while noting that stricter reviews on projects are needed to avoid expanded debt risks.

LIQUIDITY: The People's Bank of China (PBOC) injected CNY10 billion via 7-day reverse repos with the rate 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 keep liquidity reasonable and ample, the PBOC said on its website.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) rose to 2.2046% from the close of 2.1519% on Tuesday, Wind Information showed. The overnight repo average increased to 2.1446% from the previous 2.1302%.

YUAN: The currency strengthened to 6.3535 against the dollar from 6.3678 on Tuesday. The PBOC set the dollar-yuan central parity rate lower at 6.3677, compared with 6.3738 set on Tuesday.

BONDS: The yield on the 10-year China Government Bond was last at 2.9050%, up from Thursday's close of 2.9000%, according to Wind Information.

STOCKS: The Shanghai Composite Index gained 1.18% at 3,637.57, while the CSI300 index rallied 1.50% to 4,995.93. Hang Seng Index edged up 0.06% to 23,996.87.

FROM THE PRESS: The PBOC made a 25-bps cut to relending to support SMEs and the rural sector, another loosening after a 50bps RRR cut on Monday, so another policy rate cut may be less likely in the short term, the China Securities Journal reported citing analysts. The RRR cut is expected to drive down the Loan Prime Rate without affecting the medium-term lending facility rate, which will help conserve policy room, the newspaper said citing Wang Qing, an analyst with Golden Credit Rating. MNI noted that LPR will be released on Dec. 20.

China will emphasize growth next year, keep monetary and fiscal policies stable with a looser leaning, while focusing on expanding domestic demand and promoting consumption, the Economic Information Daily said in an editorial. China may keep its deficit-to-GDP ratio around this year’s 3.2% as well as maintain the scale of new local government special bonds around 2021’s CNY3.65 trillion, the newspaper said. The top priority will be stimulating spending and investment with more consumption vouchers and measures to encourage car and home appliance sales expected, the newspaper said. The slow real estate sector may improve as construction of affordable housing accelerates, forming the focus of real estate investment next year, the newspaper said.

The world needs to be on guard for the U.S. exporting its economic crisis as it is forced to speed up the tapering by uncontrolled inflation, and appearing unable to help boost its economic growth, the state-run Global Times said in a commentary. China’s decision to cut reserve requirement ratios on Monday ahead of the anticipated tapering by the Federal Reserve highlights its ample room for economic stability in rivalry with the U.S., the newspaper said. China’s liquidity release may be a preparation to hedge the potential capital gap and manage the anticipated shock by future U.S. monetary tightening, the Global Times said.