MNI Press Digest Jan 29: Liquidity, Yuan, Debt Risks

The following lists highlights from Chinese press reports on Monday:

The PBOC drained CNY150 billion yuan on Thursday, pushing up market rates as regulators hoped to prevent asset inflation and excessive arbitraging through unregulated leveraging, the Financial News reported citing Zhou Maohua, an analyst from China Everbright Bank. The overall liquidity demand before the mid-February Lunar New Year has dropped as issuance of local debt quotas was delayed, while demand for cash slowed due to pandemic protocols, the newspaper wrote citing Li Yiju, a researcher from the Bank of China. The PBOC may still inject through OMOs to meet rising demand during the Lunar New Year, the newspaper reported citing Li.

The Chinese yuan is likely to appreciate over 2021 as the economy continues to perform, though it may come under pressure if the western economies shake off the effects of the pandemic and withdraw easing measures, Huang Yiping, a former member of the PBOC Monetary Policy Committee, said in an interview with the China Finance 40 Forum. Though the Federal Reserve seems unlikely to substantially adjust its monetary policy this year, China should take precautions from now on to prevent possible capital outflows, rising interest rates and currency devaluation, Huang said.

The China Banking and Insurance Regulatory Commission (CBIRC) will improve its systems to resolve bond default risks and strictly forbid debt evasions, the Shanghai Securities News reported citing the agency's annual work meeting. The CBIRC will better regulate private placements to avoid risks such as illegal fundraising and lending, punish malicious behaviors such as fraudulent issuance, financial fraud, and market manipulation. It would also supervise the financial system to close all loopholes, according to the News report.