Core Viewpoint - The recent appreciation of the RMB is not primarily driven by "settlement" but rather influenced by a weaker USD and central bank interventions, with settlement rates showing a decline rather than an increase [2][3][4]. Group 1: RMB Appreciation and Settlement - Since mid-October, the RMB has appreciated significantly by 1.42% against the USD, while the USD index has only weakened by 0.34%. This has sparked discussions about a potential "year-end settlement" [3][8]. - Despite the RMB's appreciation, the settlement rate has decreased from 63.1% in September to 54.1% in October and further to 52.0% in November, indicating that the expected settlement surge has not materialized [3][8]. - Various indicators suggest that a settlement surge typically leads to higher swap points, increased RMB transaction volumes, and reduced foreign exchange deposits. However, since November, swap point spreads have decreased from 97 pips to 36 pips, and foreign exchange deposits have continued to grow [3][19]. Group 2: Year-End Settlement Patterns - Historically, "year-end settlement" tends to occur in December due to increased current account income, but improvements in settlement rates are not significant. The growth in settlement amounts is attributed to concentrated export receipts, increased primary and secondary income, and a slight rise in settlement rates [4][43]. - The changes in year-end settlement rates are influenced by prior RMB performance and the timing of the Chinese New Year. Typically, when the RMB strengthens, the selling rate declines, while improvements in settlement rates lag by 1-2 quarters [4][55]. Group 3: Potential for RMB to Break "7" - A delayed settlement surge may provide some short-term support for the RMB, with historical data indicating that after two consecutive quarters of appreciation, settlement rates often improve. The upcoming Chinese New Year may also extend this improvement into January [5][112]. - However, risks of a USD rebound and central bank interventions may affect the pace at which the RMB breaks the "7" level. Current non-commercial short positions in the USD are at a record high, indicating potential reversal risks [5][88].

Key Points - The article discusses the recent economic events, including the Bank of Japan's interest rate hike and weaker-than-expected U.S. non-farm payroll and CPI data [2][70][76] - The Japanese government has approved a significant economic stimulus package amounting to 18.3 trillion yen (approximately $118 billion), marking a 31% increase from the previous year's budget [64] - The U.S. unemployment rate rose to 4.6% in November, with non-farm payrolls adding 64,000 jobs, which was above market expectations [74] - The U.S. CPI for November was reported at 2.7% year-on-year, significantly below market expectations, influenced by data quality issues due to the government shutdown [76] Group 1: Major Assets & Overseas Events & Data - The Japanese yen depreciated rapidly, while COMEX silver saw a significant increase [3] - Developed market indices showed mixed performance, with the UK FTSE 100 and France's CAC40 rising by 2.6% and 1.0%, respectively, while the Nikkei 225 and Hang Seng Index fell by 2.6% and 1.1% [3] - The S&P 500 and NASDAQ indices increased by 0.1% and 0.5%, respectively, while the 10-year U.S. Treasury yield decreased by 3.0 basis points to 4.16% [2][3] Group 2: Employment Data - The U.S. non-farm payrolls added 64,000 jobs in November, exceeding the market expectation of 50,000, while the unemployment rate increased from 4.4% to 4.6% [74] - The labor force participation rate was reported at 62.5%, slightly above the expected 62.4% [74] Group 3: Inflation Data - The U.S. CPI for November was reported at 2.7% year-on-year, with core CPI at 2.6%, both significantly lower than market expectations [76] - The data collection for CPI was affected by the government shutdown, leading to potential distortions in the reported figures [76]

Core Viewpoint - The article discusses the significant turning points in China's economy for 2025, highlighting the weakening of the "scar effect" post-pandemic, the diminishing impact of tariff conflicts, the reduced marginal drag from real estate adjustments, and the improved integration of short-cycle frameworks with long-term reform directions [4][5][8]. Group 1: Turning Points in Economic Operation - The impact of the post-pandemic "scar effect" is significantly weakening, as evidenced by improved travel data and a divergence between core CPI and PPI trends [5][6]. - The influence of tariff conflicts on China's economy is diminishing, with exports showing resilience and an improved structure of export goods, indicating a new phase of domestic transformation and upgrading [6][7]. - The marginal drag from real estate adjustments on economic growth is expected to weaken, with new construction leading investment growth and a shift in the housing market dynamics favoring new homes [7][8]. - The integration of short-cycle frameworks with long-term reform directions has improved, with a robust policy system focusing on high value-added production and human-centered demand management [8][9]. Group 2: Recent Economic Indicator Weakness - The decline in investment growth since mid-year is not attributed to a single industry but shows significant regional differentiation, partly due to the "crowding out effect" from accelerated debt reduction efforts [10][11]. - The implementation of "debt clearance" policies has also affected investment funds, creating a similar "crowding out effect," although this is expected to strengthen the microeconomic foundation in the long run [11][12]. - Some regions report insufficient project reserves, which has impacted current investment performance, but this is anticipated to improve in the upcoming planning year [12]. Group 3: Policy Recommendations Based on Macro-Micro Temperature Difference - The phenomenon of "macro-micro temperature difference" has become more pronounced, indicating a disconnect between macroeconomic indicators and micro-level experiences, which is essential for understanding policy directions [13][14]. - Restoring corporate profitability and increasing household income levels are critical policy directions to address the economic cycle issues, emphasizing the need for policies that consider micro-level incentives [15][16]. - Recommendations include focusing on improving residents' income, increasing leisure time, creating favorable consumption environments, and providing quality products, rather than relying solely on leveraging consumption [16].

Core Viewpoint - The article discusses the concept of "deposit migration" and highlights three common misconceptions in the market regarding excess savings and their implications for investment behavior [2][3][4]. Summary by Sections Misunderstanding One: Underestimating Excess Savings - The market's discussion on "excess savings" often focuses on fixed deposits while neglecting the scale of wealth management funds. The excess savings calculated based on deposits is less than 4 trillion, but when considering all types of funds, the total excess savings approaches 10 trillion, indicating that the market may underestimate the funds available for investment [2]. Misunderstanding Two: Underestimating the Speed of Investment - "Non-bank deposits" are commonly tracked to gauge the scale of "migration," but this metric includes interbank business disturbances. By using "non-bank net liabilities," which excludes such disturbances, two rounds of high growth have been observed since September 24, suggesting that residents are experiencing two rounds of "deposit migration," with a more pronounced effect expected in the second half of this year [3]. Misunderstanding Three: Underestimating Investment Sensitivity - Since 2021, residents have excessively allocated their excess savings to fixed-income assets, which have seen a significant decline in excess returns. This situation makes it challenging to meet residents' reinvestment intentions amid a backdrop of accelerating declines in housing prices. The process of "rebalancing" funds may continue into 2026 as nominal GDP gradually recovers [4].

Core Viewpoint - The article emphasizes that the technological revolution is irreversible, supported by China's vast market, which allows for multiple rounds of trial and error, forming a complete industrial and supply chain that is resilient to external fluctuations [6][8]. Economic Outlook - In 2026, the economy is expected to enter a "non-typical recovery" phase characterized by "stable volume and rising prices," where prices shift from a downward spiral to a moderate recovery, leading to improved corporate profits and micro-level confidence [6]. - Structural differentiation will continue, with significant disparities in policy support across different economic sectors, resulting in an unbalanced recovery [6]. A-Share Market Insights - Instead of focusing on "value re-evaluation," it is more pertinent to discuss "capital rebalancing." The market has been overly pessimistic about fundamentals, with the overall A-share yield exceeding government bond yields by 100 basis points, indicating a severe mispricing [7]. - Four key events have shifted market expectations: changes in the policy environment post-September 2024, the emergence of DeepSeek shifting investment focus from macro to micro, U.S. tariff policies raising concerns about non-U.S. capital stability, and discussions on "anti-involution" leading to a shift of fixed-income funds towards equity assets [8]. Technological Revolution and Investment Opportunities - The article expresses optimism regarding the AI bubble, asserting that the fourth technological revolution will not be halted by short-term market fluctuations. China's large consumer market allows for extensive trial and error, leading to substantial industrial and supply chain development [8][9]. - As the "capital rebalancing" process deepens in 2026, opportunities in the A-share market are expected to emerge, driven by the non-typical economic recovery and the new wave of technological revolution [9].

Core Viewpoint - The focus of future fiscal revenue and expenditure may be on maintaining deficits, standardizing tax collection, supplementing local financial resources, and resolving hidden debts [2][48] Group 1: Fiscal Revenue and Expenditure Overview - In the first eleven months of 2025, the national general public budget revenue reached 200,516 billion yuan, a year-on-year increase of 0.8%, while expenditure was 248,538 billion yuan, up 1.4% year-on-year [1][6] - In November, the broad fiscal expenditure showed a significant improvement with a year-on-year decline of -1.7%, narrowing the drop by 17.5 percentage points compared to October, while fiscal revenue fell by -5.2%, a further decline of 4.6 percentage points [2][7][50] Group 2: Factors Influencing Fiscal Performance - The divergence in fiscal revenue and expenditure is partly due to base disturbances in the revenue side and the ongoing drag from land finance [2][8] - The broad fiscal revenue in November 2025 saw a year-on-year decline of -5.2%, with government fund revenue down by -15.8% and general fiscal revenue at -0.02% [4][14] Group 3: Support for Fiscal Expenditure - The 5,000 billion yuan limit on local special bonds and the implementation of financial tools have become important supports for broad fiscal expenditure in November [3][10] - The government fund expenditure turned positive in November, reaching a growth of 2.8%, significantly improving from a negative position in October, attributed to the 5,000 billion yuan local special bond limit [39][50] Group 4: Future Fiscal Strategy - Looking ahead to 2026, the fiscal revenue focus may include maintaining necessary fiscal deficits, standardizing tax incentives, addressing local fiscal difficulties, and urging local governments to actively manage debts [13][49] - The central economic work conference indicates that the revenue side will emphasize maintaining necessary fiscal deficits and standardizing tax incentives and fiscal subsidy policies [2][48]

Overview - The unemployment rate in the US rose to 4.6% in November, exceeding market expectations, while non-farm payrolls showed a slight increase of 64,000 jobs, against a forecast of 50,000 [1][6][10] - The labor participation rate increased to 62.5%, slightly above the expected 62.4% [1][6] Structure - The rise in the unemployment rate to 4.6% reflects temporary layoffs and improvements in labor supply, with the government’s "deferred resignation" plan contributing to job losses in October [2][20] - The unemployment rate is close to triggering the "Sam Rule," with the critical point being 4.7% [2][27] - The credibility of the November unemployment data is questioned due to a low response rate of 64% in household surveys [2][27] Outlook - The probability of the Federal Reserve lowering interest rates in January 2026 is uncertain and will depend on December's economic data [3][35] - Short-term demand remains weak due to tariff impacts, government shutdowns, and AI effects, but labor supply may contract further, leading to a gradual rebalancing of the job market by 2026 [3][32] - The Federal Reserve's confidence may be bolstered by stronger-than-expected retail sales data, which could influence their decision on interest rates [3][35]

Core Viewpoint - The article highlights the ongoing weakness in industrial production and real estate transactions in China, with various sectors showing signs of decline or stagnation in activity levels. Group 1: Industrial Production - Industrial production continues to show weakness, with a notable decline in the operating rates of blast furnaces [4][5] - The weekly apparent consumption of five major steel products has also decreased [5] - In the petrochemical sector, there is a marginal improvement in operating rates for certain products, while downstream consumption remains relatively weak [8][12] Group 2: Construction Industry - The cement industry shows stable production and a slight increase in prices, with the national grinding operating rate remaining steady [15][19] - Cement shipment rates have slightly declined, and the inventory ratio continues to decrease [15][20] Group 3: Real Estate Market - The national average daily transaction area for commercial housing remains low, with significant declines in transactions across different city tiers [29][31] - The transaction volume in first, second, and third-tier cities has shown varying degrees of weakness [29][31] Group 4: Demand and Consumption - Freight volumes have decreased, but port cargo throughput remains higher than the same period last year [34] - Passenger traffic remains high, with flight operations slightly above last year's levels [38] - Movie attendance and box office revenues are significantly higher than in previous years, while automobile sales have seen a decline [42][45] Group 5: Price Trends - Agricultural product prices have generally increased, with notable rises in fruits, vegetables, and eggs, while pork prices have slightly decreased [55][58] - Industrial product prices have shown a significant decline, particularly in energy and chemical sectors [60][62]

Core Viewpoint - The article emphasizes that the market has misunderstood the concept of "deposit migration," highlighting three main misconceptions regarding excess savings, the speed of market entry, and the investment attributes of excess savings [2][9]. Group 1: Misunderstanding Excess Savings - The discussion around "deposit migration" often equates a decrease in deposits with an increase in market investments, overlooking the role of wealth management products [3][10]. - The constructed comprehensive savings indicator shows that excess savings are significantly larger than excess deposits, with current excess savings estimated at over 9.4 trillion yuan, reflecting a 29.8% savings rate, the highest in 15 years [3][26]. - Historical analysis indicates that potential market entry from excess savings could exceed one trillion yuan, with past bull markets showing substantial amounts of savings entering the stock market [4][31]. Group 2: Underestimating Market Entry Speed - The reliance on "non-bank deposits" to track migration is flawed, as it includes interbank business disturbances, leading to an underestimation of the speed at which residents are entering the market [5][34]. - The "non-bank net liabilities" metric provides a more accurate reflection of market entry, showing significant increases since September 2024, suggesting a potential addition of 8,000 billion yuan to securities trading margin [5][37]. - Auxiliary indicators, such as margin deposits and financing balances, indicate a notable "deposit migration" phenomenon, with significant increases in both metrics since mid-2024 [6][41]. Group 3: Investment Sensitivity of Excess Savings - Unlike overseas experiences, excess savings in China since 2021 have shown a stronger investment characteristic, primarily influenced by changes in asset allocation rather than direct consumption support [7][49]. - The reduction in housing expenditures has been a major contributor to excess savings, with a significant decline in housing consumption from 7.7 trillion yuan in 2021 to 3.1 trillion yuan by 2025 [7][53]. - The current environment of declining fixed-income asset yields is pushing residents to seek new investment opportunities, indicating a potential shift in asset allocation behavior [7][63].

Core Viewpoint - Economic differentiation reveals clues about policy transformation, as "old indicators" overlook "new changes" in the economy [2][4][89] Consumption - Consumption policies are shifting from goods to services, leading to a decline in social retail sales while service retail shows strength. The social retail sales growth fell to 1.3%, driven by a decline in retail growth for goods such as home appliances and automobiles [2][8][68] - Service consumption remains positive, with total service retail sales increasing by 5.4% year-on-year, despite a slight decline in restaurant income [2][4][8] Real Estate - Real estate financing weakened due to credit risks from certain property companies, causing a significant drop in investment. In November, self-raised funds for property companies decreased, leading to a 25.3% decline in credit financing growth [2][12][63] - Real estate investment growth fell to -29.9%, with new construction and completion rates also showing significant negative growth [2][12][63] Investment - Recent policy measures have alleviated the "crowding out effect" of debt repayment on investment, with fixed asset investment showing a month-on-month rebound of 2.1% to -10.1% [3][22][88] - Infrastructure investment improved by 2.9% to -6.7%, while manufacturing and service sector investments also saw slight recoveries [3][22][88] Production - Industrial production maintained resilience, with industrial value-added growth stabilizing at 4.8%. The easing of workday effects and previous high inventory levels contributed to this stability [3][33][42] - Certain downstream industries, such as food and textiles, experienced significant production growth, while the automotive sector saw a decline [3][33][42] Summary - The economic structure is increasingly differentiated during the policy transformation process, but the positive effects of policies on the economy are becoming evident. Consumption policies are transitioning towards services, and while indicators for goods consumption are declining, service retail growth is rising [4][89][90] - Investment policies are focusing on "new investment" areas, with signs of improvement in new infrastructure and service sector investments, despite ongoing challenges in the real estate sector [4][89][90]