MNI China Daily Summary: Wednesday, August 26

EXCLUSIVE: Chinese property investment, a key driver of economic growth, should continue its surge this year despite increased official scrutiny of developers' borrowing, with some companies already facing a struggle to pay their liabilities but likely to seek to compensate for scarcer financing by boosting sales revenue via incentives for buyers, policy advisors told MNI.

LIQUIDITY: Liquidity condition across China's interbank market tightened modestly in August, as tax payments again weighed, along with heavy reverse repo maturities, the latest MNI Liquidity Conditions Index shows. The Liquidity Condition Index rose to 84.4 in August from July's 68.8, the highest level since January, with 70% of respondents reporting tighter liquidity conditions. The higher the index reading, the tighter liquidity appears to survey participants.

LIQUIDITY: The People's Bank of China (PBOC) injected CNY200 billion via 7-day reverse repos with the rate unchanged on Wednesday. This resulted in a net injection of CNY50 billion given the maturity of CNY150 billion of reverse repos, according to Wind Information. The operations aim to keep liquidity reasonable and ample, the PBOC said on its website. Meanwhile, the CNY150 billion of medium-term lending facilities matured today have been rolled over on Aug. 17, fully meeting the liquidity needs, the PBOC added.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 2.1799% from Tuesday's close of 2.2132%, Wind Information showed. The overnight repo average decreased to 1.6145% from the previous 1.9262%.

YUAN: The currency strengthened to 6.8919 against the dollar from 6.9117 on Tuesday. The PBOC set the dollar-yuan central parity rate lower for a second day at 6.9079, compared with Tuesday's 6.9183.

BONDS: The yield on 10-year China Government Bond was last at 3.0475%, up from the close of 3.0425% on Tuesday, according to Wind Information.

STOCKS: The Shanghai Composite Index lost 1.30% to 3,329.74, while the CSI300 index tumbled 1.17% to 4,706.13. Hang Seng Index edged up 0.02% to 25,491.79.

FROM THE PRESS: Chinese regulators are increasing efforts to deal with banks' non-performing loans for the rest of the year as data and official statements indicated considerable future risks, the Economic Information Daily reported. The efforts come as the so-called "Big Four" SOE asset management companies said they would acquire more non-performing assets. Many local AMCs have started a new round of capital increases and expanded their financing channels, preparing for the disposal of non-performing assets, the newspaper said.

China needs to place more emphasis on proactive fiscal policies to boost demand, ease employment pressure and solidify the economic recovery, the China Securities Journal said in a commentary. Flexible monetary policies need to be more targeted to prevent looser credit from disrupting the market, the Journal said. Fiscal policies can be ramped up given that more debt has been issued and more funds transferred to local governments. Spending can also be quickly directed to supporting key industries, boosting investments and employment, according to the Journal's commentary.

China's property developers need to boost sales after a poor-performing 1H when they reached less than 40% of their targets, reports the China Securities Journal. Real estate companies should focus on outstanding sales to manage their cash flow and avoid blind expansion, the Journal quoted Li Jianqiao, a research director from the China Index Academy. Companies with a high leverage ratio and singular financing options will endure pressure, Li said.