Core Viewpoint - The article discusses the macroeconomic changes since the "924" policy, highlighting a recovery in actual growth followed by marginal slowdown, with GDP growth rates fluctuating above 5% in 2024 and 2025, driven by strong performance in manufacturing, retail, real estate, and IT services, while some sectors like construction and finance are lagging behind [1][16]. Group 1: Economic Growth and GDP Composition - Actual GDP growth has transitioned from "central repair to marginal slowdown," with GDP growth rates of 4.6% and 4.7% in Q2 and Q3 of 2024, respectively, and stabilizing at 5.4% in Q4 2024 and Q1 2025 [1][16]. - The manufacturing sector has seen a significant acceleration in growth, with a 1.0 percentage point increase compared to Q3 2024, while construction and finance sectors have experienced declines [17]. - The demand side shows differentiation, with strong exports and policy benefits in the manufacturing and real estate sectors, while construction and financial services are underperforming due to local debt issues and weak investment [1][16]. Group 2: Price Trends and PPI - Prices have undergone a "weak recovery followed by a retraction," with PPI showing a cumulative year-on-year decline of 2.8% in the first half of 2025, lower than the -2.2% average for 2024 [2][21]. - Traditional upstream industries like coal and steel have significantly contributed to the PPI decline, accounting for 66% of the drop, while emerging manufacturing sectors have shown reduced drag on PPI [22][24]. - The PPI has fluctuated, with a slight recovery expected in late 2024 and early 2025, but a subsequent decline in March 2025 indicates ongoing supply-demand imbalances [20][22]. Group 3: Corporate Profitability - Industrial profits for large-scale enterprises have seen a year-on-year decline of 1.1% in the first five months of 2025, marking the fourth consecutive year of negative growth [24][25]. - Profit growth is uneven across sectors, with equipment, non-ferrous metals, and essential consumer goods leading, while sectors like coal and automotive are struggling [24][26]. - The impact of pricing on costs is evident, with falling coal prices benefiting the electricity sector, while the overall profit margins remain constrained by weak demand and pricing pressures [24][25]. Group 4: Inventory Trends - Nominal finished goods inventory has shown weak trends since hitting a low in July 2023, with year-on-year growth rates of 2.1%, 3.3%, and 3.5% expected at the end of 2023, 2024, and May 2025, respectively [28][29]. - Certain industries, particularly upstream mining and non-ferrous metals, face potential inventory reduction pressures, while most other sectors are at historically low inventory levels [28][29]. Group 5: Investment and Policy Directions - The government is expected to stabilize household balance sheets and profits through policies supporting real estate, employment, and service consumption, with a focus on essential consumption sectors like agriculture and fisheries [40][41]. - Investment in infrastructure is projected to increase, particularly in water conservancy and urban renewal projects, with significant growth rates noted in central-led investments [44][45]. - The introduction of new policy financial tools aims to support technological innovation and consumption, with a focus on urban infrastructure and public safety projects [46][48].

Core Viewpoint - The industrial enterprises' revenue in the first half of 2025 showed a slight increase of 2.5% year-on-year, compared to 2.1% in 2024, indicating a marginal improvement in performance [1][5][6]. Revenue and Profit Analysis - The revenue growth exhibited a pattern of "accelerating first, then slowing down," with monthly growth rates peaking at 4.2% in March and declining to 1.0% in May and June [1][4]. - The profit of industrial enterprises decreased by 1.8% year-on-year in the first half of 2025, showing a slight narrowing of the decline compared to previous years [1][6][7]. - The profit structure was characterized by "increased volume, decreased prices, and declining profit margins," with a cumulative PPI decline of 2.8% [7][11]. Industry Performance - Profit growth was concentrated in sectors such as metals (non-ferrous and steel), equipment manufacturing, and certain consumer goods (tobacco, food, agricultural products), with some industries experiencing double-digit profit growth [11][14]. - Industries with significant profit declines included mining (coal and black mining), petrochemicals, and light manufacturing, attributed to commodity price adjustments and weak domestic construction demand [14][15]. Inventory and Financial Stability - Both nominal and actual inventories showed a downward trend, with nominal inventory decreasing for three consecutive months, indicating a shift towards destocking [3][17]. - The asset-liability ratio of industrial enterprises remained stable at 57.9%, with a slight year-on-year increase of 0.2 percentage points [18][19]. Future Outlook - Several favorable factors for profit growth in the second half of 2025 include a significant decrease in the base effect starting in August and potential improvements in prices and profit margins due to anti-involution measures [19].

Group 1 - The recent appreciation of the RMB since April 14, with the exchange rate moving from 7.21 to 7.14, indicates a nearly 1% increase despite two rounds of USD index rebounds during the same period [1][2] - The appreciation of the RMB is synchronized with the upward trend in the equity market, driven by changes in risk premiums and domestic economic policies aimed at stabilizing growth [2][4] - The World Bank estimates China's GDP for 2024 at $38.19 trillion, suggesting that the RMB should appreciate based on purchasing power parity, as domestic consumption has reportedly surpassed that of the US [3][4] Group 2 - The combination of improved US-Japan trade relations and strong US earnings reports has led to significant gains in global equity markets, with the S&P 500 and other indices reaching new highs [5][10] - The domestic market is experiencing improved supply-demand expectations, with infrastructure investments boosting market sentiment and contributing to RMB appreciation [5][8] - The recent trade agreement between the US and Japan, which includes a reduction in tariffs on Japanese vehicles, is expected to enhance Japan's export capacity and positively impact its stock market [10][11] Group 3 - The European Central Bank (ECB) has maintained its policy rate at 2%, with President Lagarde indicating a preference to keep rates unchanged unless there is a significant deterioration in the macroeconomic outlook [12] - The US has announced an AI Action Plan aimed at accelerating innovation and establishing a global leadership position in AI technology [13] - Domestic economic indicators show a mixed picture, with actual GDP growth at 5.20% and nominal GDP growth at 3.87%, reflecting ongoing challenges in the economic recovery process [14][15] Group 4 - The domestic liquidity environment has shown significant fluctuations, influenced by risk preferences and redemption pressures in broad-based funds, leading to uncertainty in interest rate trends [16][17] - The 10-year government bond yield has risen to 1.73%, reflecting changing expectations regarding nominal GDP and the impact of infrastructure investments [17] - The construction sector is expected to see accelerated spending in the second half of the year, as fiscal spending patterns shift [18][19] Group 5 - The agricultural sector is under scrutiny, with measures being implemented to control pig production capacity and stabilize prices, reflecting ongoing supply-side reforms [19][20] - The recent price adjustments in the agricultural sector, including a rise in pork prices, indicate a response to market conditions and regulatory measures [21][22] - The government is actively seeking to enhance consumer spending through targeted policies in various sectors, including services and tourism [19][24]

Core Viewpoint - The overall performance of public finance in the first half of 2025 is stable, with a slight decline in revenue growth, indicating the need for continued improvement in tax and government fund income through PPI and land market enhancements [5][23]. Group 1: Public Finance Revenue - In the first half of 2025, public finance revenue showed a cumulative year-on-year decline of 0.3%, slightly lower than the previous year's growth of 1.3% [1][6]. - Tax revenue decreased by 1.2% year-on-year, an improvement compared to last year's decline of 3.4%, while non-tax revenue growth significantly slowed from 25.4% last year to 3.7% this year [1][8]. - The decline in non-tax revenue is attributed to a high base last year and a reduced reliance on non-tax income by the government [1][6]. Group 2: Monthly Performance - In June, tax revenue increased by 1.0% year-on-year, slightly higher than the previous value, while non-tax revenue fell by 3.7%, indicating an expanded decline [2][9]. - Domestic value-added tax and corporate income tax recorded year-on-year increases of 5.0% and 2.7%, respectively, contributing positively to June's fiscal revenue growth [2][11]. - The equipment manufacturing industry, modern services, and cultural sports entertainment sectors showed strong tax performance, reflecting the economic recovery in these areas [2][11]. Group 3: Fiscal Expenditure - Narrow fiscal expenditure in June saw a year-on-year decline of 0.4%, down from 2.6% previously, influenced by a decrease in non-tax revenue and a lull in infrastructure funding [3][12]. - Technology spending led the expenditure categories with an 18.1% year-on-year increase, while infrastructure-related expenditures showed weak performance, particularly in transportation and agriculture [3][14]. - The overall expenditure progress for the first half of the year was at 47.6%, indicating a slower pace compared to previous years, with expectations for acceleration in the second half [3][13]. Group 4: Government Fund Income - Government fund income in the first half of 2025 decreased by 2.4% year-on-year, primarily due to continued weakness in the land market, with land transfer income down 6.5% [4][19]. - In June, government fund budget revenue surged by 20.8%, marking a significant increase, although July data showed a notable decline, raising questions about the sustainability of this recovery [4][19]. - Government fund budget expenditure rose sharply by 79.2% year-on-year, largely driven by the issuance of special bonds, indicating a significant increase in overall fiscal spending [4][20].

Global Economic Outlook - The global economic growth rate is expected to slow down to 2.3% in the first half of 2025, down from 2.9% in the previous year, marking the lowest level in 17 years excluding recession years [1][11] - Factors contributing to this slowdown include rising trade policy uncertainties due to de-globalization, tightening financial conditions in some countries, and a balanced labor market in the US and Europe leading to a decrease in wage growth [1][11] Inflation Trends - Major economies are experiencing relatively high and sticky inflation rates, with June core CPI year-on-year rates at 2.9% for the US, 2.3% for the Eurozone, and 3.4% for Japan [2][15] - The European Central Bank (ECB) has cut interest rates four times this year, while the Federal Reserve remains in a pause phase regarding rate cuts [2][16] Currency Market Dynamics - The global currency market is characterized by high risk-free interest rates and a divergence between the US dollar and non-US currencies, with the dollar index declining by 9.7% year-to-date as of July 21 [3][18] - Non-US currencies have generally appreciated, with notable increases of 12.9% for the Euro and 6.6% for the Japanese Yen [3][18] Asset Performance - The performance of global assets reflects expectations of preventive rate cuts by the Federal Reserve and fiscal expansion in Europe, with the Nasdaq and DAX indices rising by 8.6% and 22.1% respectively [3][20] - Gold prices have increased by 29.2% due to high deficit rates in Western economies and geopolitical factors [3][20] Economic Growth Projections - For the second half of 2025, the US GDP is projected to grow at an annual rate of 1.5%, with quarterly growth rates of 2.1%, 0.7%, and 1.2% [4][24] - The Eurozone's GDP growth is expected to slow to 0.7% in the second half, while Japan's GDP growth is projected to decline to 0.5% [4][27] Inflation Forecasts - Inflation rates are expected to diverge among major economies, with US core CPI projected to rise from 2.9% to 3.3% by the fourth quarter, while Eurozone inflation is expected to decrease to around 1.9% [5][29] - Japan's inflation is likely to remain above 2%, driven by labor shortages and rising wages [5][30] Monetary Policy Challenges - Central banks face the dual challenge of balancing inflation and growth, with the Federal Reserve expected to initiate rate cuts in the fourth quarter of 2025 [6][32] - The ECB is anticipated to lower rates further, while the Bank of Japan may also consider a rate hike depending on economic conditions [6][34] Impact of US Legislation - The "Beautiful America Act" is projected to increase the federal deficit by approximately $3.4 trillion from 2025 to 2034, while tariffs are expected to generate about $2.8 trillion in revenue [7][35] - The act is estimated to boost US GDP by an average of 0.5% over the next decade, with potential for higher growth if tax reforms are successful [7][35] Dollar Index Trends - The dollar is expected to weaken in the medium term due to tariff impacts and changing global supply chains, with potential for short-term rebounds based on economic data or geopolitical events [8][40] - A weaker dollar could benefit US companies with significant overseas revenue, as approximately 41% of S&P 500 companies' income comes from international markets [8][44] Corporate Earnings Outlook - The weakening dollar is likely to enhance the profitability of US companies with substantial foreign earnings, contributing approximately 0.4-0.5 percentage points to overall EPS for each percentage point of dollar depreciation [8][44] - The overall earnings growth for US companies is expected to outpace economic growth in the second half of 2025, driven by favorable currency effects and supportive fiscal policies [8][46]

Core Viewpoint - The July Purchasing Managers' Index (PMI) for strategic emerging industries shows a seasonal decline but has turned positive year-on-year, indicating resilience in industrial prosperity despite a slight month-on-month decrease [1][5][6]. Group 1: PMI Overview - The July EPMI decreased by 1.1 points to 46.8, with only the new materials sector remaining in the expansion zone among seven sub-industries, reflecting a reduction in the number of expanding sectors [1][5][9]. - The absolute prosperity level is 0.7 points higher than the same period last year, marking a transition from negative to positive year-on-year growth [1][8]. Group 2: Sub-Indicators Analysis - In July, production, product orders, and export orders in emerging industries fell by 1.3, 1.5, and 2.2 points respectively, with export orders declining for two consecutive months [2][9]. - The production-to-demand ratio remained stable at 2.2, fluctuating within a narrow range for five months [2][12]. - Financing conditions improved, with the difficulty of obtaining loans decreasing by 1.4 points in July [2][14]. - A notable positive signal is the stabilization of sales prices, which increased by 1.7 points, while purchase prices continued to decline [2][14]. Group 3: Sector-Specific Insights - The new materials sector has shown a continuous increase in prosperity for three months, with a July index above 50, indicating strong performance compared to other sectors [3][17]. - High-end equipment manufacturing and energy-saving environmental protection sectors maintained resilience, while the biotechnology and new energy vehicle sectors saw a decline in prosperity [3][17]. - Export orders for biotechnology and new energy vehicles fell significantly, by 17.7 and 10.1 points respectively [3][20]. Group 4: Market Implications - The EPMI data suggests a generally positive impact on the market, with the month-on-month decline being anticipated and the year-on-year increase indicating a slope lower than seasonal averages [4][22]. - The shift in key industry sales price indices from decline to increase reflects the effectiveness of "anti-involution" policies in stabilizing nominal growth [4][22].

Group 1 - The policy focus is shifting from actual growth to nominal growth, with an emphasis on "anti-involution" measures to improve product quality and eliminate low-price competition [1][2] - The central economic work conference highlighted the need for government investment to effectively drive social investment, especially in light of expected slowdowns in exports, consumption, and equipment investment in the second half of the year [2][3] - The implementation of new policies in key industries such as steel, non-ferrous metals, petrochemicals, and building materials is expected to accelerate, aiming to optimize supply and eliminate outdated production capacity [1][4] Group 2 - The "anti-involution" policies are likely to cover industries with low capacity utilization in both traditional raw materials and emerging manufacturing sectors [2] - The government is expected to utilize various policy tools, including environmental regulations, credit policies, and anti-competitive laws, to address the issue of involution [2] - The impact of supply-side constraints on economic growth and employment is anticipated to be mitigated by improvements in nominal growth, which could enhance corporate profitability [2] Group 3 - The opening of the Yarlung Tsangpo River downstream hydropower project, with a total investment of approximately 1.2 trillion yuan, signifies a trend towards major infrastructure projects led by the central government [4][21][28] - The financial report for June indicates a significant increase in the central bank's total assets, reflecting a moderate level of liquidity in the banking system [18][19] - The construction of the hydropower project is expected to contribute to the overall economic growth and infrastructure development in the region [28] Group 4 - The steel industry index has seen a notable increase of 8.7% since the announcement of "anti-involution" policies, outperforming the broader market index [22][24] - The pricing process in the steel industry is currently in the early stages of adjustment, with expectations for further policy details to emerge [24] - The overall market breadth is improving, with a significant increase in the proportion of stocks surpassing their 240-day moving averages, indicating a broad-based market rally [8][9]

Core Viewpoint - The monetary policy in the first half of 2025 will be divided into two phases, focusing on stabilizing the economy and adjusting liquidity based on economic conditions [1][7][36] Monetary Policy Outlook - The first phase (January-February) will see a stable economic start with less pressure for counter-cyclical adjustments, focusing on preventing capital outflow and stabilizing exchange rates and interest rates [1][7] - The second phase (March-June) will shift towards stabilizing growth as previous policy goals are met, with potential for rate cuts and structural tool expansions [1][7][36] Liquidity Analysis - Narrow liquidity reflects the monetary policy stance, tightening initially and then loosening as the policy focus shifts [2][13] - The narrow liquidity is expected to remain limited in its further loosening due to macro-prudential considerations and the need to prevent capital outflow [2][13][62] Credit and Social Financing - Entity credit has stabilized in the first half of the year, with expectations for further improvement in the second half due to low base effects and proactive credit supply [17][66] - Social financing growth may slow down in the second half, with an expected year-end growth rate of around 8.2% [21][22] M1 Growth - M1 growth has rebounded, driven by low base effects, recovery in financing demand, and increased foreign exchange settlements, with expectations for continued support in the second half [25][26] - The M1 growth rate is projected to be between 3%-4% in the baseline scenario, with fluctuations expected throughout the year [25][26] Inflation and Asset Performance - Improvements in broad liquidity, particularly M1, typically indicate a rise in future inflation expectations and upward pressure on interest rates, yet current asset performance remains subdued [28][29] - Changing low inflation expectations requires new external forces, with recent policy signals indicating a focus on supply-side reforms and stabilizing demand [31][32] Structural Policy Tools - The central bank may restart government bond trading and consider further reserve requirement reforms, with potential structural tools focusing on digital finance and consumption [10][12][38] - The effectiveness of structural tools will depend on their implementation and the overall economic environment [38][39]

Core Viewpoint - The fiscal characteristics of 2025 include expansion in total scale, front-loaded issuance rhythm, and differentiated structural features, which can explain some economic phenomena in the first half of the year [1][10][45]. Group 1: Fiscal Characteristics - Characteristic one is the expansion of total scale and differentiation in narrow and broad structures. The narrow fiscal deficit target rate of 4.0% is the upper limit of market expectations, with the target deficit scale increasing by 39.4% compared to 2024, marking the highest growth in the past decade [13][14][45]. - Characteristic two is the front-loaded fiscal rhythm and differentiation between central and local structures. Local governments have been actively issuing debt, but the contribution of infrastructure projects has not been significant. Central fiscal measures, including national bond issuance and "national subsidies," have been the main support for various economic segments [2][16][19]. - Characteristic three indicates that both narrow and broad fiscal revenues are influenced by lagging effects, PPI levels, and land market conditions, with growth rates lower than initial budget targets. This has contributed to the widening fiscal deficit in the first half of the year [22][23][24]. Group 2: Fiscal Revenue Expectations - Looking ahead to the second half of 2025, favorable conditions for fiscal revenue include potential improvements in nominal growth due to "anti-involution" policies, which may boost tax revenue. However, adverse factors include a slowdown in real estate sales and a potential decline in land revenue [24][25][26]. Group 3: Government Debt Supply - In the second half of 2025, the government is expected to net increase about 5.8 trillion yuan in various types of government debt. The net financing pressure for government debt in the second half is relatively small compared to the first half [27][28][29]. Group 4: Fiscal Expenditure Projections - Broad fiscal expenditure is primarily determined by the scale of bond issuance and revenue. The expected growth rates for broad fiscal expenditure in optimistic, neutral, and cautious scenarios are approximately 8.4%, 7.8%, and 7.0%, respectively, all higher than the previous year's 2.7% [30][31][32]. Group 5: Infrastructure Performance - Infrastructure performance in the second half of 2025 is expected to improve compared to the first half, driven by the acceleration of long-term national bond funding and the introduction of new policy financial tools [5][33][34]. Group 6: Diverse Fiscal Support Areas - Beyond infrastructure, fiscal support is increasingly diverse, including "national subsidies" to boost retail sales, potential nationwide child-rearing subsidies, urban renewal initiatives, and measures to address corporate debt [35][36][37]. Group 7: Fiscal and Tax System Reforms - The focus of fiscal and tax system reforms during the "15th Five-Year Plan" period will include tax reforms, such as shifting consumption tax collection to local levels, and adjustments in the distribution of fiscal powers between central and local governments [39][40][41]. Group 8: Asset Pricing Implications - The fiscal clues for the second half of the year are expected to influence asset pricing, particularly benefiting construction-related industries and emerging sectors like low-altitude and digital economies [43].

Group 1 - The industrial sector's operating rate remains strong during the off-season, with high operating rates in upstream industries and increased electricity consumption due to high temperatures. As of the second week of July, the national blast furnace operating rate increased by 0.8 percentage points year-on-year, while the coking industry's operating rate decreased by 0.1 percentage points [1][7][9] - The retail growth rate of passenger cars has slightly declined due to a high base from the previous year. From July 1 to 13, retail sales of passenger cars grew by 7% year-on-year, down from 15% previously, while wholesale sales increased by 34% [2][9][10] - The sales growth of major home appliances showed a significant rebound in the first week of July, followed by a slight decline in the second week. Online sales of air conditioners, refrigerators, and washing machines from June 30 to July 6 were 63.1%, 7.3%, and 10.0% year-on-year, respectively [2][10][11] Group 2 - Container throughput and TRVSDCVN data for Sino-American shipping have slowed compared to June. From June 30 to July 13, the average container throughput at domestic ports increased by 3.2% year-on-year, down from 4.6% in June [3][12] - The funding situation for housing construction projects has stabilized, while infrastructure funding and physical workload still lack a clear trend. As of July 15, the national construction site funding arrival rate was 58.9%, with a month-on-month decline of 0.2 percentage points [4][13][14] - The real estate sales continue to show a weakening trend since April. As of July 16, the average daily transaction area in 30 major cities fell by 24.2% year-on-year [4][17] Group 3 - Domestic pricing of bulk commodities has risen under the "anti-involution" expectation, with strong performance in black commodities like coking coal and rebar. The price of lithium carbonate and the photovoltaic industry index have also improved [4][18][19] - The overall economic data for July indicates that the most active sectors remain in "two new" areas, while real estate sales are a significant factor to watch as they show signs of deceleration [5][6][19]