MNI China Daily Summary: Tuesday, September 15

EXCLUSIVE: China's banks face a jump in non-performing loans next year as pandemic emergency measures allowing small business borrowers to defer loan payments expire, policy advisors told MNI, adding that lenders should make provisions and boost capital to avoid running into trouble in 2021.

POLICY: China's growth in Q3 will be significantly faster than Q2 as increased demand, accelerated investment and recovering consumption combine to drive the economy forward, said Fu Linghui, spokesman of the National Bureau of Statistics at a briefing on Tuesday.

LIQUIDITY: The People's Bank of China (PBOC) injected CNY600 billion via one-year medium-term lending facility (MLF) with the rate unchanged at 2.95% on Tuesday. This aims to roll over the CNY200 billion of MLFs maturing this month and fully meet liquidity needs, the PBOC said on its website. CNY170 billion in 7-day reverse repos also matured today, according to Wind Information.

DATA: Industrial production grew 5.6% y/y in August, up from the 4.8% gain in July and outperforming the 5.2% forecast. Fixed-asset Investment fell 0.3% y/y for the first eight months, the smallest fall this year, narrowing from the 1.6% fall in the Jan-Jul period and better than the projection of 0.4%. Infrastructure investment growth recovered to -0.3% in Jan-Aug from the 1.0% fall in the first eight months. Registered urban unemployment edged down 0.1 percentage point to 5.6% from July.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) slightly increased to 2.0996% from Monday's close of 2.0856%, Wind Information showed. The overnight repo average increased to 1.7028% from the previous 1.5908%.

YUAN: The currency strengthened to 6.7775 against the dollar from 6.8235 on Monday. The PBOC set the dollar-yuan central parity rate lower at 6.8222, compared with Monday's 6.8361.

BONDS: The yield on 10-year China Government Bond was last at 3.1050%, down from the close of 3.1350% on Monday, according to Wind Information.

STOCKS: The Shanghai Composite Index gained 0.51% to 3,295.68, while the CSI300 index rose 0.80% to 4,688.48. Hang Seng Index increased 0.38% to 24732.76.

FROM THE PRESS: China's Jan-Aug electricity consumption rose 0.5% y/y to 4.7676 trillion kWh, the first positive growth for accumulated usage this year, on the back of the stable economic recovery and higher summer temperatures, the People's Daily reported citing official data and Ye Chun, a director from the China Electricity Council. Total usage in August rose 7.7% to 724 billion kWh, while the manufacturing sector's consumption was up 9.7% to 351 billion kWh, an increase of 7.4 percentage points from last August, the newspaper reported.

Chinese governments' tighter controls over the housing markets and pressure to reduce debt may force developers to cut prices in the next two months, a period when the markets are usually more active, the Economic Information Daily said citing Chen Xiao, an analyst with Zhuge.com. The government may also further tighten regulations in the coming month as the latest data showed that house prices are increasing at a faster pace from last month, said Zhang Dawei, the chief analyst with Centaline Property.

The abrupt departure of the U.S. ambassador to China Terry Branstad signals an intention by the U.S. to downgrade its relations with China and his replacement is likely to be more hawkish towards China, Global Times reported citing Chinese scholars. Branstad's resignation came after a hardening of U.S. policies over the last three years, leaving little room for Branstad's mission to be useful, the newspaper said citing Li Haidong, a professor at the China Foreign Affairs University.