MNI China Press Digest July 25: Trade, Macro Leverage, SOEs

Highlights from Chinese press reports on Thursday:

• China must reduce policy interventions and optimize the allocation of resources to boost domestic demand and achieve a more balanced foreign trade relationship, according to Zhang Bin, deputy director at the Institute of World Economics and Politics. China’s high trade surplus comes at the expense of domestic consumption which exacerbates trade disputes and sanctions, Zhang added. China’s real rate of return on overseas capital accumulated from its trade surplus was lower than that on domestic assets, meaning China’s resource allocation was not optimal.
• China’s macro leverage ratio, a measure of debt to nominal GDP, will increase passively in H2 if nominal economic growth remains lower than debt growth, according to a National Institute of Finance and Development (NIFD) report. The macro leverage ratio rose 7.5 percentage points in H1, the report said. Liu Lei, secretary-general of the National Balance Sheet Research Center said property support to stabilise real estate investment may ease increases in macro leverage. However, in the long term China requires growth in domestic demand and inflation to promote a rebound in nominal GDP growth, according to Mingming, chief economist of CITIC Securities.
• China’s SOEs saw profits reach CNY1.4 trillion between January and June this year, up 1.9% y/y, according to information released at a State-owned Assets Supervision and Administration Commission (SASAC) seminar. Looking ahead, SOEs will properly manage the accounts receivable of SME firms and promote the sustained recovery of the economy, according to Zhang Yuzhuo, director at the SASAC. SOE leadership was focused on developing new quality productivity and promoting technological and industrial innovation, Zhang added.