Merrill Lynch gave China Cinda (01359.HK) and China Huarong (02799.HK) an underperforming market rating. The target prices were adjusted to 2.95 yuan and 2.9 yuan respectively. Bank of America Merrill Lynch published a report stating that in response to the reform of state-owned enterprises, it is believed that domestic non-performing assets will increase on the supply side, affecting the economy and financial system. According to the bank, by downgrading the ratings of the two companies to “outperform the market,” investors can see from the experience from 1998 to 2005 the pressure that non-performing asset management companies are currently facing. It also indicates that the government is encouraging banks to dispose of non-performing assets, including selling to non-performing asset management companies and developing accounts receivable financing, etc., which will put pressure on non-performing asset management companies, so the estimated risk will increase. Bank of America Merrill Lynch estimates that non-performing asset management companies will absorb the amount of traditional non-performing assets from banks over the next 3 years to reach 2 trillion yuan. Therefore, it is necessary to bear costs on the books and wait for them to be sold before they can generate profit. At the same time, in response to more acquisitions, the sales rate has declined relatively slowly. As for restructured non-performing assets (RDA), growth will slow over the next 2-3 years, mainly due to concerns about the quality of their assets.