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     BEIJING(MNI) - Commercial Chinese banks' non-performing loans are set to
rise this year as the economy deteriorates, in a trend which could continue for
three to five years, according to a survey by China Orient Asset Management Co,
one of four big state-owned Chinese asset management companies.
     Here are main points from the survey of 405 respondents from banks and
asset managers, and 63 economists, from Nov 20 to Dec 2, 2018.
     --Some 50.4% of participants from banks and AMCs predicted rising NPLs this
year, with 40.45% expecting the bad loans ratio to grow most in the property and
construction sectors. Another 49.4% saw NPLs increasing at a moderate pace over
the next three to five years, pushed higher by a runoff in industrial
over-capacity, a difficult economic environment and a soft property market.
     --Some 51.5% of bank participants said real credit risks would be higher
than indicated by published NPL ratios in 2019, as lenders massage down figures.
Dealing with NPLs is a more urgent task this year than last, according to 53%.
     --The central bank will keep benchmark interest rates unchanged this year,
according to 44.2% of financial institution participants, while 18% thought the
PBOC would cut rates once. A majority doubted looser monetary policy could
significantly improve banks' asset quality.
     --Yuan trade will be volatile, with the currency trading between 6.75-7.0
to the dollar for most of the year, 60% of participants from financial
institutions predicted. According to China Orient, the yuan should suffer
moderate depreciation pressure and its volatility band expand, due to trade talk
uncertainty and bigger cross-border capital flows as the country opens up its
financial sector.
     --Local government debt is a major risk, 34.9% of economists responded.
Risks will intensify as land transfer fees and the economy grow at a slower
pace. Some 46% of economists thought local government should be the top target
for deleveraging campaigns.
--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com
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