Core Viewpoint - The Federal Reserve's potential decision-making should no longer be viewed through the lens of preventive rate cuts, but rather as a race against a "slightly lagging" curve, with the possibility of a more significant rate cut and dovish signals than expected due to persistent weak employment and increasing political pressure [4][11]. Group 1: Political Shift vs Economic Shift - Fed Chair Powell has undergone a significant political shift, moving from confidence in the labor market to concerns about its slowdown, influenced by political dynamics rather than purely economic data [5][11]. - The political cost of maintaining "price stability" is rising, leading to expectations of a more aggressive rate cut in September [4][18]. Group 2: Employment Data and Its Implications - The recent downward revisions in employment data, including a significant adjustment of 91,100 jobs, provide Powell with a strong data-driven rationale for a substantial rate cut [13][15]. - The credibility of the Bureau of Labor Statistics (BLS) is declining, with officials expressing concerns over the reliability of employment data, which may impact future monetary policy decisions [12][13]. Group 3: Rate Cut Consequences - A potential rate cut of 50 basis points in September and a total of 100 basis points by year-end are plausible, despite inflation concerns, as the political cost of maintaining current policies increases [18][20]. - The long-term implications of rate cuts could lead to "re-inflation" risks, complicating the fiscal landscape and potentially undermining the Fed's independence [19][20].

Core Viewpoint - The article discusses the impact of the ongoing trade tensions initiated by the United States on global trade dynamics, highlighting the opportunities and challenges faced by emerging markets like ASEAN and Africa, while noting the decline in China's export share to the U.S. [3][21] Group 1: Trade Dynamics - The U.S. remains the largest consumer market globally, and ASEAN countries are expected to benefit from the trade tensions due to their relatively lower tariff rates and stronger production capabilities [3]. - By July 2025, China's share of imports to the U.S. is projected to decrease by 4.4 percentage points to 9%, while ASEAN's share is expected to increase by 3.2 percentage points to 14% [3]. - Despite a significant decline in U.S. import demand since April, imports from ASEAN have maintained a growth rate of around 30% [3]. Group 2: ASEAN Export Growth - ASEAN's increase in U.S. import share is primarily driven by labor-intensive goods such as toys, footwear, and furniture, as well as electrical machinery and mechanical equipment [4]. - In the first half of 2024, ASEAN exported 25.5% of the world's footwear, 16.7% of electrical machinery products, and 12.6% of textile and apparel products [4]. - Vietnam's GDP grew by 7.5% year-on-year in the first half of 2024, with foreign direct investment reaching approximately $15.4 billion, a year-on-year increase of 8.8% [4]. Group 3: China's Export Strategy - Although China has lost some export share to the U.S., it has maintained high growth in exports to ASEAN, with a 12% year-on-year increase in exports to ASEAN in the first half of 2025 [5]. - The export growth to ASEAN is supported by intermediate and capital goods, which contributed significantly to the overall export growth [5]. - China's exports to Africa are becoming more diversified, with significant growth in machinery, vehicles, and electrical equipment [13]. Group 4: Africa's Economic Potential - Africa, with a population of 1.48 billion and a high proportion of young people, presents significant potential for Chinese exports [12]. - By 2024, China is expected to account for 23.1% of Africa's imports, an increase of 6.2 percentage points since 2019 [12]. - The economic growth forecast for Africa is 3.9% in 2025, driven by its rich natural resources and demographic advantages [12]. Group 5: Overall Trade Impact - Emerging markets like ASEAN and Africa are the main beneficiaries of the current trade tensions, with their shares in U.S. imports increasing [21]. - In contrast, regions like Japan, South Korea, and Europe may face greater pressure due to declining shares in the U.S. market [21]. - In the first half of 2024, China's export share to major sample regions increased by 0.1 percentage points, while ASEAN's share rose by 0.5 percentage points, primarily at the expense of Europe and Japan [21].

Core Viewpoint - The article discusses the ongoing challenges in the U.S. labor market, highlighting a potential rise in unemployment rates and the difficulties faced by the private sector in job recovery, particularly in light of recent economic data and policy implications [2][6][15]. Employment Trends - The initial response rate for the August non-farm survey showed a significant rebound, but the trend of employment deterioration has not ceased, with private sector job additions contracting for four consecutive months [4][6]. - The total non-farm job additions from May to August amounted to only 107,000, which is below the average monthly growth of 127,000 in the first four months of 2025 [4][6]. - The unemployment rate increased from 4.248% to 4.324%, primarily due to a slight recovery in labor force participation [6][11]. Economic Sensitivity - The U6 unemployment rate and the unemployment rate for African Americans have both seen significant increases, indicating underlying vulnerabilities in the labor market [11][16]. - The manufacturing sector, particularly sensitive to tariffs, has experienced a decline in working hours since peaking in May and June, suggesting further potential job losses [9][11]. Federal Reserve Implications - The Federal Reserve's recent labor data has undergone significant revisions, with a cumulative downward adjustment of 279,000 in non-farm job additions and a 0.21% increase in the unemployment rate since the July FOMC meeting [6][15]. - There is speculation about whether the Fed may need to adjust its interest rate strategy in response to the deteriorating labor market conditions, especially after Powell's dovish stance [6][15]. Structural Issues - The article emphasizes that even if the U.S. economy avoids recession, young individuals and undocumented immigrants are already experiencing economic hardships, highlighting a structural issue in the labor market [16][15]. - The combination of declining full-time employment, rising part-time employment, and increasing permanent unemployment poses a greater risk for future unemployment rate increases [7][11].

Core Viewpoint - The article discusses the fundamental changes in globalization and political dynamics that are forcing developed economies to rely more on fiscal measures for economic adjustment, leading to increased political resistance, a gradual loss of fiscal discipline, and a subservient monetary policy, which in turn raises the risk premium for global long-term bonds [2][4]. Summary by Sections Monetary Policy Framework Changes - The 2025 Jackson Hole meeting is seen as a pivotal moment, potentially marking the beginning of the end for Federal Reserve independence, as external political pressures influence monetary policy decisions [4][5]. - The shift in monetary policy framework is strategically used to provide a long-term rationale for short-term dovish turns, making policy changes appear more legitimate and less arbitrary [6][8]. - Historical lessons emphasize the importance of central bank independence, with past political pressures leading to significant economic consequences, such as the inflation crisis of the 1970s [6][8]. Political Pressure on the Federal Reserve - The Trump administration employed a multi-layered strategy to pressure the Federal Reserve into lowering interest rates, including public attacks on Chairman Powell and threats of dismissal [12][13]. - This public humiliation created a hostile political environment, challenging the legitimacy of the Fed's decision-making [14]. - The administration also sought to exploit administrative issues, such as the renovation of the Fed's headquarters, to undermine Powell's authority and create grounds for dismissal [15][18]. New Macroeconomic Paradigm - A shift towards a "big fiscal era" is occurring, where fiscal policy is becoming the primary tool for economic management, while monetary policy is relegated to a secondary role [22][23]. - The effectiveness of monetary policy is diminishing in the face of supply-side shocks, with fiscal measures increasingly driving economic outcomes [24]. - Powell's compliance with political pressures reflects a broader trend where the Fed's independence is compromised, making it more responsive to political dynamics [23][24]. Global Market Outlook - The market has largely priced in a 25 basis point rate cut by the Fed in September, but this may only be the beginning of a series of cuts, with potential for a total of 75 basis points within the year [27][29]. - The dual nature of the upcoming rate cuts serves both preventive and responsive purposes, addressing economic slowdown while also providing liquidity to the market [27][29]. - The implications of these cuts present both opportunities and risks for the stock market, as liquidity expansion may support valuations, but also highlight underlying economic weaknesses [29][32].

Core Viewpoint - The three pillars supporting the RMB exchange rate—China-US interest rate differential, policy risk premium, and purchasing power parity—are shifting favorably towards appreciation, with the central bank's midpoint guidance and foreign capital FOMO sentiment acting as additional catalysts [2][5]. Group 1: RMB Exchange Rate Dynamics - The RMB/USD exchange rate has experienced fluctuations this year, initially appreciating in a weak dollar environment, then depreciating due to tariff concerns, and recently regaining upward momentum [4]. - The current trend shows a convergence of the RMB midpoint, onshore, and offshore rates towards the 7.0 level, supported by both fundamental factors and event-driven catalysts [4][5]. Group 2: Interest Rate Differential - The narrowing of the China-US interest rate differential has been a fundamental basis for the RMB's appreciation over the past three months [6]. - Since July, the yield on China's 10-year government bonds has risen over 20 basis points to above 1.8%, while the US 10-year Treasury yield has decreased from 4.5% to around 4.2%, leading to a significant narrowing of the nominal interest rate differential by nearly 50 basis points [7]. - Adjusting for inflation, the actual interest rate differential has further narrowed, with China's low inflation levels contrasting with a slight rebound in US inflation [7][10]. Group 3: Policy Risk Premium - The policy risk premium for Chinese assets is decreasing, while it is rising for US assets due to concerns over the independence of the US Federal Reserve [10]. - The ongoing geopolitical tensions and the potential for a more stable RMB asset environment are contributing to a long-term reduction in China's sovereign risk premium [10]. Group 4: Purchasing Power Parity - The RMB is currently undervalued against the USD based on purchasing power parity (PPP), with the IMF indicating that 1 USD's purchasing power is equivalent to approximately 3.4 RMB [12]. - The long-standing undervaluation is attributed to limited capital account openness and concerns over China's economic transition risks, but the door for RMB revaluation is opening [12]. Group 5: Catalysts for RMB Appreciation - The central bank's midpoint rate has been set unusually strong, indicating an official expectation for RMB appreciation [18]. - Recent reports suggest the potential introduction of a RMB stablecoin, which could enhance the internationalization of the RMB and increase its attractiveness for foreign investment [20]. - Foreign capital is increasingly entering the A-share market, with significant inflows observed in August, driven by a shift in sentiment from trading to investing in Chinese assets [24]. - Export companies are accelerating their currency conversion as the cost of holding USD rises, contributing to RMB appreciation [25]. Group 6: Market Outlook - The weak dollar environment is expected to continue supporting RMB appreciation, although factors such as declining export expectations and the need for domestic demand recovery may influence the pace of appreciation [28].

Core Viewpoint - The article discusses the conditions required for the Producer Price Index (PPI) to turn positive, emphasizing the need for significant increases in commodity prices, particularly in the context of current economic conditions and historical precedents [3][4][9]. Summary by Sections Commodity Price Trends - Since July, major commodities have experienced a slight decline after a peak, with coal and black metals rising by 13.8% and 3.9% respectively by mid-August [3]. - The PPI is expected to show a year-on-year increase in August due to a low base last year, but it remains in negative territory for 34 consecutive months [3]. PPI Composition and Impact - The PPI consists of various components, with black metals, non-ferrous metals, crude oil, coal, and other goods contributing 13.6%, 7.3%, 16.7%, 9.3%, and 53.2% respectively [5]. - In the first seven months of 2025, crude oil, black metals, coal, and other goods negatively impacted the PPI by 1, 0.9, 0.5, and 0.9 percentage points, while non-ferrous metals contributed positively by 0.4 percentage points [5]. Price Requirements for PPI to Turn Positive - For the PPI to turn positive by the end of the year, the average month-on-month PPI from August to December needs to reach 0.43%, which is similar to levels seen during the 2016 supply-side reforms [8]. - Corresponding to this, prices for rebar, non-caking coal, copper, and crude oil need to increase by 11% from July levels, reaching 3580 CNY, 940 CNY, 88000 CNY, and 79 USD respectively [8]. - If crude oil and copper prices remain stable, rebar and non-caking coal prices would need to rise by approximately 20% from July averages to achieve a positive PPI [8]. Historical Context and Future Outlook - Historical examples show that significant price increases in commodities often require external factors, such as the 198% rise in non-caking coal prices in 2021 due to energy-saving measures [9]. - A more realistic scenario for PPI turning positive may occur in Q2 of next year, where a 4% increase in prices from July levels would suffice [9]. - However, after Q2 of next year, the low base effect will diminish, necessitating further conditions for PPI positivity, especially if crude oil prices continue to decline [9][11]. Demand Considerations - The analysis assumes that upstream price increases can be effectively transmitted to downstream sectors, which is contingent on sufficient demand [10]. - Weak demand, particularly in the real estate sector, has historically hindered price transmission, preventing the PPI from turning positive despite rising upstream prices [11].

Core Viewpoint - The A-share market is experiencing a bull market driven by a combination of favorable external liquidity conditions, stable policy environment, and unique domestic factors that enhance its attractiveness [4][12][34]. Group 1: Global Market Context - In August, the A-share index reached new highs not seen since December 2021, with trading volumes frequently exceeding 2 trillion yuan, indicating an accelerating bull market [4]. - The global market is witnessing synchronized growth, but A-shares stand out due to their robust fundamentals and low valuation levels, which provide a fertile ground for valuation recovery [4]. Group 2: U.S. Policy and Global Liquidity - The resolution of U.S. policy uncertainties, particularly regarding trade agreements and fiscal expansion, has laid a foundation for the rise of global risk assets, including A-shares [5]. - The introduction of a $4 trillion "Big Beautiful Bill" is expected to increase the U.S. federal deficit as a percentage of GDP, shifting expectations from fiscal contraction to expansion, which supports market growth [5][6]. Group 3: A-share Market's Unique Characteristics - A-shares benefit from a 5.3% real GDP growth rate in the first half of the year, which is rare among major economies, and are expected to maintain around 5% growth for the year [12]. - The rise of AI technologies and the overseas expansion of innovative pharmaceutical companies are seen as key drivers for A-share market potential [12]. - The A-share market is experiencing a unique liquidity environment, with the renminbi appreciating, making Chinese assets more attractive to foreign investors [13]. Group 4: Market Dynamics and Capital Inflows - The A-share market's recent surge is characterized by strong participation from retail and leveraged funds, with foreign capital also showing renewed interest [16]. - In July, household deposits decreased significantly, while non-bank institution deposits increased, indicating a shift in risk appetite among investors [17]. - The current low proportion of household deposits relative to A-share market capitalization suggests significant potential for capital inflows into the stock market [17]. Group 5: Earnings Recovery Potential - Despite the strong market momentum, July's macroeconomic data showed signs of weakness, indicating that current market drivers are primarily liquidity and sentiment rather than fundamental improvements [30]. - Investment in fixed assets has declined, with manufacturing and infrastructure investments turning negative, while the real estate market continues to cool [30]. - Positive signals in corporate liquidity data suggest that earnings may begin to recover in the coming year, although the sustainability of this recovery remains contingent on the real estate market and external export conditions [31]. Group 6: Future Considerations - The sustainability of the A-share market's upward trend depends on the continuity of favorable external macro conditions and the domestic regulatory environment [34]. - Any shifts in geopolitical stability or U.S. policy could quickly alter market sentiment, while internal regulatory measures may impact market dynamics [34].

Core Viewpoint - The "15th Five-Year Plan" aims to achieve high-quality economic development through the expansion of domestic demand and the overall leap in new productive forces, which will mutually drive each other [2][20]. Group 1: Macroeconomic Environment - The "15th Five-Year Plan" period is crucial for achieving socialist modernization by 2035, with a key quantitative goal of doubling GDP per capita from 2020 levels by 2035, requiring an average annual GDP growth rate of over 4.4% from 2026 to 2035 [4][5]. - The external environment will face increased geopolitical risks and uncertainties, necessitating a focus on domestic development to maintain strategic initiative [7][9]. - Internally, insufficient effective demand, particularly in consumer spending, is identified as a major contradiction, with China's consumption rate significantly lower than that of developed countries [9][12]. Group 2: Internal Changes - The aging population will accelerate during the "15th Five-Year Plan," with the proportion of people aged 65 and over expected to reach 18.3% by 2030, posing challenges to economic growth and consumer demand [12]. - Urbanization will transition from rapid growth to stable development, with the urbanization rate projected to reach 70% by 2024, indicating significant potential for domestic demand expansion [15][16]. - The shift towards new industrialization is essential, with a focus on technological innovation to upgrade industrial structures and avoid falling into the "middle-income trap" [19][41]. Group 3: Domestic Demand as a Mainline - The plan emphasizes the need to enhance income distribution systems to increase residents' disposable income, particularly for middle and low-income groups, which are crucial for expanding domestic demand [23][27]. - Strengthening social security for middle and low-income groups is a priority, with a focus on improving public services and reducing household consumption burdens [29]. - Optimizing the consumption supply structure is vital, with a significant shift towards service consumption expected as the economy matures [30][31]. Group 4: Technological Advancement - The "15th Five-Year Plan" will prioritize the development of new productive forces, focusing on localized industrial development and breaking through key technological bottlenecks [42][43]. - Emphasis will be placed on increasing investment in basic research and development, aiming to raise the proportion of basic R&D spending significantly [45]. - The plan will also support the transformation and upgrading of traditional industries, promoting high-end, intelligent, and green manufacturing practices [49][50]. Group 5: Consumption Mechanisms - Establishing a long-term mechanism to promote consumption is critical, with potential indicators for consumption rates being introduced to guide economic policy [33][36]. - The plan will enhance statistical methods related to consumption to better reflect its impact on economic growth [36]. - Local government assessment mechanisms will be adjusted to prioritize consumption promotion, moving away from production-oriented evaluations [36][37].

Core Viewpoint - The article discusses the implications of a dovish monetary policy environment and its potential side effects, particularly the challenges in controlling inflation dynamics in the future. It suggests that after a series of interest rate cuts, the U.S. economy may face higher inflation levels, with a more pronounced stagnation this year and increased inflation next year [2]. Group 1: Powell's Dovish Shift - Powell's remarks at the Jackson Hole meeting marked a significant shift towards a dovish stance, indicating rising concerns about employment risks and a potential increase in layoffs and unemployment rates [4][6]. - The change in Powell's focus from solely the unemployment rate to the weaker aspects of labor data, such as slowing labor growth and declining labor participation rates, reflects a growing concern about the labor market [7][9]. - Powell's acknowledgment of the balance of risks shifting suggests that the current economic conditions warrant adjustments in monetary policy, moving away from a wait-and-see approach [13]. Group 2: Modification of Monetary Policy Framework - The modification of the monetary policy framework returns to a more flexible inflation targeting approach, emphasizing a balanced approach between inflation and employment, which may lead to increased dovish tendencies [14][17]. - The new framework indicates a tolerance for employment levels that may exceed real-time assessments of maximum employment without necessarily posing risks to price stability, suggesting a more accommodative stance towards economic overheating [18]. Group 3: Future Rate Cuts and Asset Implications - The threshold for not cutting rates in September has increased, with potential for a 50 basis point compensatory cut if non-farm data does not improve significantly [19]. - The dovish signals from the Fed may not lead to a continuous downtrend in the dollar, as the actual actions and future policy expectations could enhance U.S. economic prospects [22]. - The article suggests that the dovish monetary policy environment may support economic growth, particularly in consumer spending, while also leading to higher inflation expectations among bond investors [25][26].

Core Viewpoint - The core variable of US trade policy remains Trump himself, and his controversial tariff strategy is expected to be prevalent in the next two to three years, with any country aiming to gain future discourse power needing to become the "greatest common divisor" connecting different trade circles [2][23]. Group 1: Trump's Tariff System 2.0 - During his first term, Trump initiated a trade revolution centered on "America First," using tariffs as a primary weapon, which ignited global trade disputes and altered the existing international trade landscape [4][5]. - In his second term, Trump's tariff tactics evolved into a more structured and comprehensive approach, consisting of four main components: reciprocal tariffs for trade balance, punitive tariffs for specific reasons, tariffs on transshipment to combat tax avoidance, and industry barriers to protect domestic industries [5][6]. Group 2: Reciprocal Tariffs - The "reciprocal tariffs" create a trade circle centered around the US, with countries like the UK and Australia enjoying a baseline tax rate of 10%, while others face higher rates based on their trade relations and concessions made to the US [6][7]. - As of August 29, 2023, new regulations require small packages valued at $800 or less to pay certain taxes upon entry, with specific rates based on the country of origin [7]. Group 3: Punitive Tariffs - Trump increasingly uses punitive tariffs as a core tool for handling diplomatic matters, with various justifications, including combating cross-border crime and exerting geopolitical pressure [9][10]. - The US has implemented significant tariffs on goods from Canada and Mexico, and additional tariffs on Chinese products, with the potential for further increases based on cooperation in drug trafficking issues [9][10]. Group 4: Transshipment Tariffs - To close potential loopholes in tariff policies, the Trump administration established a "transshipment" clause allowing customs to impose a 40% tariff on goods attempting to circumvent tariffs through third countries [11]. - The challenge lies in the ambiguous definition of "transshipment," which complicates enforcement and creates uncertainty for US customs [12][13]. Group 5: Industry Tariffs - The US has invoked the 1962 Trade Expansion Act's Section 232 to impose high tariffs on strategically important industries, aiming to reverse the trend of industrial hollowing and enhance domestic supply chain resilience [16][17]. - Tariffs have been applied to steel, aluminum, and are expected to extend to semiconductors and pharmaceuticals, with a notable exemption for companies investing in the US [16][17][18]. Group 6: Oral Agreements and Execution Discrepancies - Tariffs serve as a preliminary tool in trade negotiations, with the Trump administration relying heavily on oral agreements, leading to confusion and disputes over key terms [20][21]. - Discrepancies in the interpretation of agreements have hindered finalizing trade deals, as seen in negotiations with Japan and South Korea [20][21][22]. Group 7: Transition to Inventory Reduction Cycle - Following the implementation of high tariffs, the US has entered a phase of inventory reduction, with significant declines in inventory growth rates for durable and non-durable goods [28][29]. - The shift in import demand is attributed to the finalization of tariff policies and the completion of pre-tariff procurement, leading to a focus on inventory digestion and price adjustments [29][30]. Group 8: Global Trade Landscape Transformation - The global trade structure is undergoing a profound transformation towards a multipolar development, moving away from reliance on the US-China economic model to a more decentralized network of regional trade alliances [23][30]. - Countries aiming to secure future discourse power must position themselves as essential hubs within these diverse trade networks [23].