Core Viewpoint - The article highlights three positive changes in the industrial profit landscape for July, indicating a narrowing decline in profit growth and improvements in certain sectors, particularly emerging industries and upstream manufacturing [4][14]. Group 1: Three Positive Changes - Emerging industries are experiencing rapid profit growth, with sectors such as biopharmaceuticals and integrated circuits showing significant increases of 36.3% and 176.1% respectively [4][11]. - Some industries are seeing notable improvements in profit margins due to the effects of anti-involution policies, with upstream manufacturing profit margins rising to 3.59%, compared to 2.86% in the previous year [5][12]. - The pace of asset expansion is slowing, and inventory growth is also decelerating, which helps alleviate supply-demand imbalances, with industrial finished goods inventory growth at 2.4% [5][12]. Group 2: July Industrial Profit Data Review Overall Situation: Narrowing Decline in Profit Growth - In July, the profit of large-scale industrial enterprises decreased by 1.1% year-on-year, an improvement from the previous decline of 4.3% [2][14]. - The inventory growth rate as of July was 2.4%, down from 3.1% previously [2][14]. - The profit growth rates varied by ownership, with state-owned enterprises at -6.8%, private enterprises at 2.3%, and foreign and Hong Kong, Macao, and Taiwan enterprises at -2.4% [14]. Industry Situation: Improvement in Raw Material Manufacturing Profits - In July, the mining sector saw a profit decline of 39.2%, while manufacturing grew by 6.6% and electricity, heat, gas, and water supply increased by 6.89% [15]. - The raw material manufacturing sector shifted from a 5.0% decline in June to a 36.9% increase in July, with steel and petroleum processing industries turning profitable [15].

Economic Data - In July, fixed asset investment data was weak, indicating a need for rebalancing between short-term demand and long-term supply [4] - The high investment growth in manufacturing over the past three years has created pressure on medium to long-term prices, with investment growth consistently above 6%, and two years exceeding 9% [4] - The GDP growth target of 5% for the year is achievable, with a quarterly growth rate of 4.7%-4.8% in the second half of the year being sufficient for structural optimization [4] Financial Data - July loan data was also weak, but historical context shows that weak financial data can coincide with economic turning points, as seen in 2016 when industrial medium to long-term loans dropped significantly [5] - The reduction in industrial loans in 2016 was a key factor in the economic recovery, despite the weak financial data at that time [5] Overall Conclusion - The analysis emphasizes that as long as the economy operates above a sustainable baseline, weak short-term data can be beneficial for medium to long-term economic balance [8] - The market's reaction to July data, with stable bond prices and stock performance, reflects a focus on long-term trends rather than short-term fluctuations [8] - The core conclusion is that structure is more important than total volume, highlighting the significance of underlying economic conditions over mere aggregate data [6][8]

Core Viewpoint - The article discusses potential demand-side policy reserves that may be implemented in the near future, focusing on both the restart or optimization of existing policies and new initiatives that are currently in progress [2][3]. Group 1: Infrastructure Investment - There will be an increase in infrastructure investment in the second half of the year, driven by the introduction of new policy financial tools and the commencement of major projects in water conservancy and railways [2]. - Significant projects from the "14th Five-Year Plan" will be expedited before the planning period ends [2]. Group 2: Consumer Sector Policies - The Ministry of Commerce has announced that new policies to expand service consumption will be introduced in September, which may include the relaxation of consumption restrictions such as vehicle purchase quotas [3]. - There is a focus on increasing income through various measures, including potential adjustments to minimum wage standards and new policies in elder care and employment [4]. Group 3: Policy Dimensions - The article categorizes potential policies into two dimensions: existing policy expansion/optimization and new policies that are in progress [5]. - Existing policies may include increasing revenue through profit remittances from state-owned enterprises and enhancing local fiscal capacity by adjusting consumption tax collection [5]. Group 4: Investment and Real Estate - Major engineering projects, such as the Yaxia Hydropower Project and the New Tibet Railway, are expected to be expedited [5]. - Policies aimed at reducing the financial burden on homebuyers, such as lowering transaction costs and down payment ratios, are also anticipated [5]. Group 5: Social Welfare and Employment - There is a potential increase in social welfare support related to childbirth, elderly care, and unemployment, alongside enhanced employment support measures [5]. - The article emphasizes the importance of improving minimum wage standards across provinces [5].

Core Viewpoints - The transition of household deposits from "excessive defensive deposits" to "normal deposits" is a two-step process, currently in the first step [4] - The shift from "excessive defensive deposits" to "normal deposits" requires tracking household cash flow statements, with the ratio of new deposits to income increasing from approximately 14% (2016-2019) to 22% (2022-2024) [4][8] - Five macro-level high-frequency alternative indicators are proposed to track the progress of household deposit migration [4][10] Group 1: Deposit Scale - The ratio of household deposits to GDP in China has increased significantly, reaching 112% by the end of 2024, with an estimated excess deposit of around 40 trillion yuan [21][23] - Historical data shows that the average ratio of household deposits to GDP in China from 2010 to 2019 was 78%, with a peak of 82% [21][23] - The current household deposit level is approximately 160 trillion yuan, significantly higher than the expected range of 110 to 120 trillion yuan based on pre-pandemic trends [6][7] Group 2: Deposit Flow - The current macroeconomic challenge is the transition of excessive deposits to normal deposits, which can be accurately tracked through household cash flow statements [34] - The ratio of new deposits to disposable income has increased from 14% (2016-2019) to 22% (2022-2024), indicating a shift towards normal deposits [35][36] - The concept of "excess savings" is rejected; instead, it is defined as "defensive deposits" due to reduced investment spending in a declining asset price environment [9][36] Group 3: High-Frequency Tracking Indicators - The first indicator, the difference between current and fixed-term deposits, shows that a higher current deposit ratio indicates a weaker defensive saving intention [10][42] - The second indicator, the ratio of new household currency to new M2, indicates that a lower ratio suggests funds are flowing more towards enterprises and non-bank sectors, improving monetary turnover efficiency [11][12][44] - The third indicator, the difference between enterprise and household deposit growth rates, serves as a leading indicator for economic activity, with current levels indicating a recovery from the most pessimistic economic phase [13][48] Group 4: Defensive Deposits and Financial Markets - The fourth indicator measures the scale of non-bank institutions' financing from the real economy, which has reached historical highs, indicating a significant flow of household deposits into non-bank institutions [14][51] - The fifth indicator compares household deposits to the market capitalization of stocks, with a current ratio of approximately 1.71, suggesting that household purchasing power is still sufficient to support stock market transactions [16][56]

Group 1 - The Huachuang Macro WEI index has risen above 7%, reaching 7.14% as of August 17, up from 6.52% the previous week, indicating a recovery in economic activity driven mainly by infrastructure and durable goods consumption [2][10][11] - Retail sales of passenger vehicles have rebounded, with a year-on-year increase of 8% as of August 17, compared to a previous decline of 4% [2][15] - The land premium rate has rebounded to 10.3% as of August 17, compared to 6.5% in July, indicating a positive trend in the real estate market [2][16] Group 2 - The number of cargo container ships from China to the U.S. has decreased significantly, with a year-on-year decline of 22.7% as of August 23, compared to an average decline of 5.8% in July [4][29] - Prices of "anti-involution" commodities have weakened, with lithium carbonate experiencing the largest drop of 8.9% [4][45] - The U.S. and EU have reached an agreement on a trade framework, imposing a 15% tariff on most EU goods imported into the U.S., while certain natural resources and pharmaceuticals are exempt [4][29] Group 3 - The issuance of special bonds has accelerated, with a total of 3.26 trillion yuan issued, representing 74.2% of the planned issuance, which is faster than in 2020-2021 but slower than in 2022 [5][49] - The yields on government bonds have increased, with the 1-year, 5-year, and 10-year yields reported at 1.3665%, 1.5948%, and 1.7465%, respectively, reflecting a rise from the previous week [5][65] Group 4 - The average daily subway ridership in 27 cities has increased by 2.2% year-on-year, reaching 81.08 million passengers in the first three weeks of August [2][15] - The construction-related indicators, such as asphalt operating rates and cement dispatch rates, have shown improvement compared to last year [2][19] - The overall industrial production remains stable, with coal throughput at Qinhuangdao port showing a year-on-year increase of 11.2% [2][20]

Group 1: EU Trade Dynamics - The recovery of China's exports to the EU is not significantly impacted by US imports from the EU, as the two trends do not synchronize. China's exports to the EU have been gradually increasing since March, while US imports surged prior to the implementation of reciprocal tariffs [4][6]. - The rebound in China's exports to the EU aligns with the recovery of the Eurozone manufacturing PMI, which rose to 50.5% in August from 49.8% in July, marking the first time in three years it surpassed the growth threshold [4][6]. Group 2: ASEAN Trade Trends - China's exports to ASEAN have shown strong performance, likely influenced by transshipment trade. The growth rate of China's exports to ASEAN has remained high since April, mirroring the increase in US imports from ASEAN [4][7]. - Recent data indicates that transshipment trade may have stabilized at a high level, lacking further upward momentum. While US imports from ASEAN increased by 37.1% year-on-year in June, China's export growth to ASEAN has been fluctuating, with a year-on-year increase of 16.6% in July, significantly lower than the US growth rate [4][7]. Group 3: African Trade Insights - The strong growth in China's exports to Africa is not primarily driven by transshipment trade, as the scale of trade between China and Africa vastly exceeds that of the US. China's monthly exports to Africa are approximately $19 billion, while US imports from Africa are only around $3 billion [5]. - The increase in China's export growth to Africa is mainly attributed to vehicles and auto parts, suggesting a lower correlation with US demand cycles and tariff fluctuations. The sustainability of this growth remains to be observed [5][9].

Core Viewpoint - The article emphasizes the significance of the recent visit by the General Secretary to Tibet, marking a historic moment in the Party's attention towards the region, and outlines key policies and activities that could impact various sectors, including infrastructure, employment, and fiscal policies [2][3][4][8]. Group 1: Tibet Visit and Key Activities - The General Secretary's visit to Tibet on August 20 is unprecedented, highlighting the central government's focus on the region's stability and development [2]. - During the visit, the General Secretary stressed the importance of maintaining political stability, social order, and ethnic unity in Tibet, while promoting major infrastructure projects like the Yaluzangbu River hydropower project and the Sichuan-Tibet Railway [8]. - The visit included a meeting with local officials to discuss the implementation of the Party's governance strategies in Tibet, aiming for a modern and harmonious society [8]. Group 2: Policy Developments - A series of policies were announced, including the upcoming Shanghai Cooperation Organization summit, which will feature key foreign leaders, indicating a focus on international diplomacy [3]. - The government is implementing measures to boost employment and consumer spending, such as new guidelines for personal pension withdrawals and initiatives to enhance the sports industry [3][12]. - The State Council is focusing on fiscal policies, including the regulation of PPP projects and adjustments to VAT refund policies, aimed at supporting various industries [4][18]. Group 3: Industry-Specific Regulations - The National Development and Reform Commission is seeking public input on new pricing behavior rules for internet platforms to prevent unfair competition and ensure market stability [4][8]. - The Ministry of Industry and Information Technology has introduced temporary measures for the regulation of rare earth mining and processing, emphasizing total quantity control to manage resources effectively [4][17]. - The Ministry of Finance has announced updates to the VAT refund policy, maintaining favorable conditions for specific industries while introducing new criteria for others [4][18].

Group 1 - The Jackson Hole Economic Symposium is an annual event held by the Kansas Federal Reserve in August, where central bank leaders announce adjustments or signals regarding monetary policy frameworks, particularly the Federal Reserve Chairman [2][10][11] - In recent years, Powell has made significant announcements at this event, including the average inflation targeting in 2020, reaffirming the temporary inflation view in 2021, and discussing the transition to a rate-cutting cycle in 2024 [2][11] Group 2 - Powell's speech this year emphasized the increasing risks of employment downturn, indicating that while the labor market appears balanced, it is a "strange balance" due to significant supply-demand slowdown, which could lead to increased layoffs and rising unemployment [3][13] - The likelihood of tariff price shocks evolving into sustained inflation seems unlikely, as current impacts are expected to be temporary and not lead to a "wage-price spiral" due to a less tight labor market [3][14] - Powell hinted at a potential rate cut in September, with the probability of a rate cut rising from 72% to 81.3% following his speech, indicating a shift in the Fed's assessment of inflation and employment risks [4][15][16] Group 3 - The adjustment of the Fed's monetary policy framework reflects changes in the macroeconomic environment, moving from an average inflation targeting to a flexible inflation targeting approach, allowing for more adaptability in response to economic conditions [5][21][24] - The removal of the "effective lower bound" statement indicates a recognition that the neutral interest rate may now be higher than in the 2010s, suggesting a shift in the Fed's approach to monetary policy [5][21] - The Fed's focus will now be on achieving a 2% inflation target in the medium term while retaining flexibility to respond to short-term economic developments [5][24]

Core Viewpoint - The article highlights the positive economic data from the US, Eurozone, and Japan, indicating a potential recovery in manufacturing and consumer confidence, which may present investment opportunities in these regions [2][3][9]. Group 1: US Economic Data - The US August S&P PMI exceeded expectations, with the manufacturing PMI initial value at 53.3, compared to the forecast of 49.7 and previous value of 49.8 [2][9]. - The July leading index from the Conference Board met expectations, showing a month-on-month change of -0.1%, in line with forecasts [2][9]. - July housing data surpassed expectations, with new housing starts at an annualized rate of 1.428 million units, above the forecast of 1.297 million units, and revised previous value from 1.321 million to 1.358 million units [2][9]. Group 2: Eurozone Economic Data - The Eurozone's August manufacturing PMI also exceeded expectations, with an initial value of 50.5, compared to the forecast of 49.5 and previous value of 49.8 [2][9]. - The July CPI final value met expectations, with a year-on-year change of 2%, matching forecasts, while core CPI was also in line at 2.3% [2][9]. - The August consumer confidence index was below expectations, with an initial value of -15.5 against a forecast of -14.7 [2][9]. Group 3: Japanese Economic Data - Japan's August manufacturing PMI rebounded to an initial value of 49.9, up from the previous value of 48.9, while the services PMI slightly declined to 52.7 from 53.6 [3][10]. - June core machinery orders exceeded expectations, with a month-on-month increase of 3%, against a forecast of -0.5%, and a year-on-year increase of 7.6%, compared to the expected 4.7% [3][10]. - July CPI was in line with expectations, showing a year-on-year change of 3.1% [3][10]. Group 4: Upcoming Economic Data - Key upcoming US economic data includes July new home sales on August 25, July durable goods orders initial value on August 26, and August consumer confidence index on August 26 [4][11]. - In the Eurozone, July M3 year-on-year data will be released on August 28, along with the final value of the August consumer confidence index [5][12]. - Japan will report July unemployment rate and job-to-applicant ratio, July retail sales, and July industrial output initial value on August 29 [5][12]. Group 5: High-Frequency Data Review - Economic activity indices for the US and Germany showed slight improvement, with the US WEI index at 2.54% for the week of August 16, up from 2.50% the previous week [6][13]. - US retail sales showed a slight year-on-year increase of 5.9% for the week of August 15, compared to 5.7% the previous week [16][22]. - Initial jobless claims in the US were weaker than expected, with 235,000 claims for the week of August 16, against a forecast of 225,000 [24]. Group 6: Financial Conditions - The US financial conditions index remained stable, while the Eurozone's index showed a slight tightening [7][32]. - Offshore dollar liquidity remained stable, with slight fluctuations in swap points for the yen and euro against the dollar [7][34]. - Long-term bond yield spreads narrowed in the US, Japan, and Germany, indicating a potential shift in investor sentiment [7][37].

Core Viewpoint - The rapid expansion of stablecoins is transforming them from mere crypto assets into key financial variables with macroeconomic implications, impacting traditional financial systems, particularly in areas like money supply, credit creation, and the U.S. Treasury market [2]. Group 1: Stablecoins as Financial Ecosystem Variables - Stablecoins have evolved from being used solely in the crypto market to broader applications, showcasing advantages in cross-border payments and crypto settlements due to their 24/7 availability and low costs [4]. - Global regulatory frameworks are being established to address the rapid development of stablecoins, with the U.S. implementing the GENIUS Act to set clear licensing and reserve requirements [4]. Group 2: Financial Institutions' Participation in the Stablecoin Ecosystem - Commercial banks are actively issuing on-chain deposits to counteract the risk of deposit erosion from stablecoins while also providing reserve custody services to stablecoin issuers [5]. - Asset management companies are managing the substantial reserves of stablecoins, particularly U.S. Treasury securities, recognizing the market opportunity as stablecoin reserves reach hundreds of billions [5]. - Payment companies are leveraging their networks to create closed ecosystems by issuing their own stablecoins or integrating third-party stablecoins to reduce payment costs and enhance transaction efficiency [5]. - Exchanges are capitalizing on the infrastructure benefits by providing low-cost fiat-stablecoin exchange channels and developing stablecoin derivatives to attract institutional investors [5]. Group 3: Impact of Stablecoins on Money Supply - The key to stablecoins not expanding the total M2 money supply lies in their adherence to a 1:1 reserve ratio, which results in structural changes in existing M2 rather than net expansion [7]. - If stablecoins begin to pay interest and expand into everyday payment scenarios, they could significantly compete with traditional banks, potentially eroding bank deposits and limiting credit creation [7]. - The introduction of a fractional reserve system for stablecoins could lead to actual M2 expansion, as stablecoin issuers would gain the ability to create new money through leverage [8]. Group 4: Stablecoins as a New Cornerstone for U.S. Treasury - Stablecoins are creating substantial incremental demand for U.S. Treasury securities, particularly short-term bills, as their reserves grow to hundreds of billions [9]. - However, the inherent risks associated with stablecoins could make them a "fragile fulcrum" for the Treasury market, particularly during liquidity crises when large-scale redemptions could lead to forced sales of Treasury holdings [9]. Group 5: Lessons from the Breakdown of the Bretton Woods System - The potential decoupling risks faced by stablecoins echo the trust crisis that led to the breakdown of the Bretton Woods system, particularly if regulators allow a shift to a fractional reserve model [10]. - The transition from a fully reserved system to a fractional reserve model for stablecoins could fundamentally alter their nature, transforming them from passive digital assets to active credit creators [10]. Group 6: Regulatory Landscape - The U.S. GENIUS Act establishes a federal regulatory framework for stablecoins, requiring issuers to hold reserves in high-quality liquid assets and undergo regular audits [31]. - Hong Kong has implemented the Stablecoin Ordinance, mandating that stablecoin issuers maintain 100% backing with high-quality assets and obtain licenses from the HKMA [32]. - Singapore's MAS has introduced a regulatory framework for single-currency stablecoins, ensuring that reserves equal at least 100% of the circulating stablecoin value [33]. - The EU's MiCA regulation categorizes different types of crypto assets and imposes reserve and disclosure requirements to protect consumers and maintain financial stability [34].