MNI China Press Digest Sep 1: Expansion, Liquidity, Lower NPL

The following lists highlights from Chinese press reports on Wednesday:

• China's PMI is expected to remain in the expansionary zone above the breakeven 50 through the rest of this year, as demand will increase with Septmber and October holidays approaching now that recent outbreaks were controlled, the China Securities Journal reported citing analysts. PMI further slowed to 50.1 in August, traditionally with slower manufacturing, worsened by the sporadic outbreaks, the newspaper said citing analyst Wen Tao with China Logistics Information Center. The deceleration of PMI indicates increased downward pressure and China should increase the lead of government investment as soon as possible to expand domestic demand, the newspaper said citing Zhang Liqun, a researcher at the Development Research Center for the State Council.
• The People's Bank of China may further boost liquidity including cutting banks' required reserve ratios to meet significant upcoming maturing MLFs and various demands of the economy, including the sales of local government special bonds, the Securities Times said citing analysts including Chen Qi of Chuancai Securities and Ming Ming of Citic Securities. On Tuesday, the central bank conducted the fourth daily reverse repo purchase valued at CNY50 billion, a larger sum and a signal that it wants to stabilize the market's expectations, the newspaper said. Liquidity showed marginal tightness at the end of August with DR007 rising to 2.2% from 2.0%, due to the maturing MLFs and due tax payments, the newspaper said. The central bank's large injections have kept market rates stable, said the newspaper.
• The collective non-performing loan ratio of Chinese commercial banks decreased 0.05 percentage point to 1.76% at the end of Q2 from Q1, while net profits in the first half totaled CNY1.1 trillion, a rise of 11.1% y/y, the China Securities Journal reported citing a report by China Banking Association. In the second half, banks will need to step up efforts disposing of non-performing assets as the industry becomes more competitive and regional differences increase, demanding higher competencies controlling risks and managing businesses, the report said. Banks face continued challenges in managing liquidity and market risks given the pandemic uncertainties, interest rate reform, a more volatile yuan and capital flow, the report said.