Rebound in second quarter offers timely relief for PBOC

A stronger-than-expected rebound in activity in the second quarter has reduced the urgency for the People's Bank of China to act after policymakers announced unprecedented emergency measures early in the year to deal with the shock from the coronavirus crisis, Reuters reported citing sources.

The PBOC also wants to avoid the side-effects caused by excessive stimulus, such as a surge in debt and risks of bubbles in the property market, said the people.

This came as 14 out of 25 mainland provinces which have released first-half GDP results recorded positive economic growth, mainland media reports.

But Zhu Min, a former deputy managing director of the International Monetary Fund and head of the National Institute of Financial Research at Tsinghua University in Beijing, said China should step up stimulating consumption.

Also, the Chinese Academy of Social Sciences estimated the United States would not place sanctions on Hong Kong and China using the Society for Worldwide Interbank Financial Telecommunication system, as the trade and financial connections among China, the US and Europe countries are still tight. However, the institution said it is possible and there is a growing chance that the US will place sanctions on single financial institutions.

In other news, Gary Ng, Asia Pacific economist at Natixis, predicted that mainland banks may reduce their dividends when they are facing lower profitability or asked to expand lendings to small and micro businesses in a recovery term, but the reduction would be small.

The French investment bank predicts the non-performing loan ratio for mainland banks would worsen slightly to 2.14 percent as of the year-end from 2.1 percent last year.

Meanwhile, BlackRock Head of Asia Pacific Geraldine Buckingham told a Bloomberg conference that the savings rate in China was around 40 percent, and that China's population would peak in 2040 and it would become the fastest aging country in the world because of the distortion in demographics due to its one-child policy.