〔Overnight Brief〕Fed Pauses RMP Purchases Unexpectedly, Wall Street Extends Hiatus to October; China's Q2 NIM Turns Up to 1.41% While July Loans Fall 340B yuan - Two-Speed Policy

1. Fed Policy: RMP Pause and Market Reaction

• **[NEW]** The New York Fed's open market operations plan for the month ending September 14 includes zero reserve management purchases (RMP), the first zero month since the program's launch in December 2025, while still planning about $17 billion in reinvestment purchases ^[1].
• **[NEW]** This pause surprised Wall Street strategists, who had expected RMP to continue at roughly $10 billion per month; BofA, Wells Fargo, and TD Securities now expect the pause to last at least through October, with TD projecting zero through mid-November ^[1].
• **[NEW]** The Fed's decision implies funding market conditions are looser than previously assumed, according to media-cited strategists ^[1].

2. China Banking and Credit: NIM Ticks Up, Loans Contract

• **[NEW]** China's commercial banks posted a second-quarter net interest margin of 1.41%, up one basis point from Q1's 1.40%, the first quarterly increase in four years, per financial regulator data; Dong Ximiao, chief economist at Zhaolian, said this may signal a bottoming and was better than market consensus ^[2][3].
• **[NEW]** July new social financing came in at 1.4 trillion yuan, with new yuan loans registering a negative 340 billion yuan, as bond financing became the main driver ^[4].
• **[ONGOING]** The number of rural small and mid-sized banks decreased by 670, raising questions about consolidation versus quality improvement ^[5].
• **[NEW]** Overall deposit rates continue to trend down, but the average five-year rate rose month-on-month ^[6].

3. US Consumer and Trade: Confidence Slips, Court Upholds Tariffs

• **[NEW]** The University of Michigan's August consumer sentiment index fell to 51, down from July's 55.2 and below the Bloomberg consensus of 55, marking a three-month low; one-year inflation expectations rose to 4.3% from 4.2% ^[7].
• **[NEW]** US July retail sales posted the largest monthly decline in over a year, with autos and online shopping notably weak; real average hourly earnings fell 0.2% year-over-year, pressuring purchasing power ^[7].
• **[NEW]** The US Court of International Trade ruled that the administration has authority under IEEPA to suspend the de minimis exemption for items priced $800 and below; by end-2025 this measure had collected over $1 billion in tariffs ^[8].

4. Regional and Policy: Hong Kong Upgrade, Shanghai Plans, Flood Response

• **[NEW]** Hong Kong's government raised its 2026 GDP growth forecast to 3.5%-4.5% from 2.5%-3.5%, after Q2 grew 4.3% year-over-year and H1 grew 5.1%, the strongest first half in five years ^[9][10].
• **[NEW]** Shanghai issued a 15-measure action plan to boost private investment, aiming to make private capital "able to invest, willing to invest, and assured to invest," and a separate plan to build a national service trade innovation demonstration zone ^[11][12].
• **[NEW]** The Ministry of Water Resources raised its flood response to Level III for the Taihu Lake basin after the water level hit 4.20 meters, 0.40 meter above the warning level; elsewhere, a dike breach in Henan's Beiru River was sealed after evacuating 2,182 people ^[13][14].
• **[ONGOING]** Shanghai Party Secretary Chen Jining visited the Lingang new area, emphasizing advanced manufacturing and digital-intelligence transformation ^[15].

5. Other Policy and Events

• **[NEW]** The national carbon market will expand to include petrochemical and chemical sectors ^[16].
• **[NEW]** The State Taxation Administration will advance social security contribution base compliance in a phased manner, not imposing a "one-size-fits-all" or "step-at-once" requirement, focusing on large and medium enterprises with payment capacity and handling past cases individually ^[17].
• **[NEW]** The APEC third Senior Officials' Meeting will take place in Dalian, China from August 17-28, with nearly 130 meetings and over 2,300 delegates expected ^[18].
• **[NEW]** The "report-action integration" policy led to a sharp decline in new single premium income in the bancassurance channel in July ^[19].