Investment Rating - The report indicates a positive outlook for high-tech manufacturing in China, suggesting it could become a key growth engine for the economy [4][5]. Core Insights - Recent advancements in China's high-tech sectors, particularly with the emergence of AI models like DeepSeek, have led to optimism regarding medium-term growth [4][5]. - High-tech manufacturing has significantly outperformed other manufacturing sectors, driven by strong domestic policy support and increased external demand [4][19]. - The sector has contributed an average of 1.1 percentage points (pp) to annual real GDP growth over the past decade, with expectations of continued contributions of around 1.0 pp from 2025 to 2029 [33][45]. Summary by Sections High-tech Manufacturing Performance - High-tech manufacturing has been a significant growth driver, contributing an average of 1.1 pp to annual GDP growth over the last decade, with a peak contribution of over 2 pp in 2021 [33][36]. - The sector's share in total manufacturing value added has increased from 30% in 2005 to 40% in 2024, and it now accounts for approximately 8% of GDP [12][33]. Factors Driving Growth - The outperformance of high-tech manufacturing is attributed to two main factors: increased domestic policy support and a rise in external demand, with real exports growing at an annualized rate of 8% from 2019 to 2024 [19][23]. - Key high-tech sectors, such as industrial robots and semiconductors, have seen substantial production growth, reflecting the government's push for self-sufficiency and technological advancement [15][19]. Future Outlook - The baseline scenario anticipates that high-tech manufacturing will continue to outperform the broader manufacturing sector, with expected annual growth rates of 4.8% in real terms from 2024 to 2029 [39][41]. - Scenario analysis suggests that high-tech manufacturing's contribution to GDP growth could range from 0.6 pp to 1.4 pp, depending on various macroeconomic factors and trade tensions [44][47].

Investment Rating - The report does not explicitly provide an investment rating for the industry Core Insights - The report revises baseline tariff assumptions to include higher tariffs, particularly on product-specific categories such as autos, pharmaceuticals, and critical minerals, which could lead to a significant increase in the effective tariff rate [2][9] - The expected increase in tariffs is projected to raise consumer prices and impact GDP growth negatively, with a peak hit to year-on-year GDP growth estimated at -0.8 percentage points under the new assumptions [3][28] - The report indicates a higher probability of recession, now estimated at 20%, due to the potential economic impact of larger tariffs [4][43] Summary by Sections Tariff Assumptions - The report anticipates further product-specific tariffs and reciprocal tariffs that could raise the effective tariff rate by approximately 10 percentage points, with a risk scenario suggesting a potential increase of up to 15 percentage points [2][10] - Current tariffs, including a 25% tariff on steel and aluminum and a 20 percentage point increase on imports from China, have already raised the effective tariff rate by about 3.3 percentage points [9][11] Economic Impact - The revised forecast for GDP growth in 2025 has been lowered to 1.7% from a previous estimate of 2.2%, reflecting the additional drag from larger tariffs [4][36] - Core PCE inflation is expected to rise to around 3% year-on-year under the new tariff assumptions, compared to a previous expectation of a decline to 2.1% [21][22] Policy and Market Reactions - The report suggests that the Federal Reserve may implement rate cuts in response to the economic risks posed by the new tariff environment, with two cuts expected in 2025 [47][49] - The uncertainty surrounding tariff policies is expected to have a significant impact on business investment, contributing to a more cautious economic outlook [24][28]

Investment Rating - The report suggests that Europe needs to significantly increase its military spending to address current shortfalls and match Russian military investment levels, implying a shift in investment strategy [10][71]. Core Insights - The report estimates that Europe requires an additional €160 billion annually in military spending to support Ukraine, rebuild military stock, and match Russian investment flows [66][71]. - The military spending in Europe has declined from approximately 4% of GDP to 2%, and it is projected to increase to around 3% over the next five years [6][71]. - The report highlights a significant gap in military capabilities, particularly in air defense, satellite technology, and nuclear deterrence, indicating that Europe is lagging behind both the US and Russia [36][43]. Summary by Sections Military Aid to Ukraine - Following the US announcement to halt military aid, Europe needs to double its military commitments to Ukraine from €20 billion to €40 billion annually to maintain total foreign military support [13][71]. Current Military Stock and Investment Needs - Europe has a cumulative military stock shortfall estimated between €250 billion and €550 billion, with a mean estimate of €400 billion, necessitating an annual investment of around €80 billion to close this gap [50][71]. - The report indicates that Europe’s annual military investment is currently about €30 billion less than Russia's, and this gap could widen further if a ceasefire occurs [58][66]. Comparison with Russia - The report estimates that Europe needs to increase its military spending by approximately €60 billion annually to match Russia's current military investment flow [66][71]. - It is noted that Russia has significantly increased its military production capacity since 2022, outpacing Europe in several areas [61][62]. Geographical Disparities in Military Spending - The report emphasizes that military spending increases will not be uniform across Europe, with countries like Germany, Italy, and Spain facing stronger pressures to raise their military budgets due to historical under-investment [74][76]. - The report suggests that increased military spending will likely benefit European suppliers, particularly in countries with significant military production capabilities [75][76].

Investment Rating - The report maintains a positive outlook on S&P 500 dividends, forecasting a growth of 6% year/year for 2025, with a payout ratio of 30% and dividends of $80 per share [11][12]. Core Insights - Despite a 6% selloff in the S&P 500 from its February high, dividend futures pricing has remained stable at 1%, indicating resilience amid market volatility [1][7]. - The main upside risk to the dividend forecast is the potential for excess capital return from the Financials sector due to regulatory reforms, which analysts have not yet fully incorporated into their estimates [3][22]. - The economists have revised the Q4/Q4 US GDP growth forecast down to 1.7%, which presents modest risks to the dividend growth forecast but more significant risks to EPS growth [3][30]. - Dividend futures are seen as an attractive investment opportunity for those who can withstand illiquidity and volatility, with forecasts indicating a 2% upside for 2025 futures and 7% for 2026 futures [35][36]. Summary by Sections Dividend Growth Forecast - The forecast for S&P 500 dividend growth in 2025 is set at 6%, down from a previous estimate of 7%, with earnings growth being the primary driver [11][12]. - The consensus expects the fastest dividend growth in Financials and Communication Services, while Energy and Real Estate are expected to grow the slowest [14][17]. Economic Indicators - The combination of policy uncertainty and weak economic data has contributed to the recent selloff in the S&P 500, with tariffs impacting investor sentiment [4][6]. - The ISM Manufacturing Index has declined to 50.3, while the ISM Services Index has increased to 53.5, indicating mixed economic signals [6][30]. Sector Analysis - In the first two months of 2025, 112 S&P 500 companies increased their dividends by a median of 7%, with 17% of these companies from the Financials sector [14][46]. - Analysts have noted that certain management teams may review their dividend payout ratios, which are currently just above 30% [21][22]. Potential Catalysts - Upcoming CCAR results in June are anticipated to be catalysts for the dividend market, as previous tests have led to dividend increases by participating banks [24][30]. - If large tech stocks initiate or increase their dividends, it could present another upside risk to the overall dividend growth forecast [28][29].

6 March 2025 | 12:50AM EST Global Economics Comment: Why Al Spending Is Not Boosting GDP (Briggs/Dong) ian hatzilis (1) Goldman Sachs & Co. LLC osenh briaas@as com Goldman Sachs & Co. LLC (212)357-9741 | sarah.dong@gs.co Goldman Sachs & Co. LLC Megan Peters 44(20) 7051-2058 megan | neters@gs.com Goldman Sachs International nvestors should consider this report as only a single factor in making their investment decision. For Reg AC certification and other important disclosures, see the Disclosure Appendix, or ...

Investment Rating - The report indicates that the investment rating for the industry remains stable, with expectations aligned with market forecasts for economic growth and fiscal targets [1][16]. Core Insights - The 2025 National People's Congress (NPC) has set the GDP growth target at "around 5%" and lowered the CPI inflation target to "around 2%", which aligns with market expectations [2][19]. - The official on-budget fiscal deficit target has been raised to "around 4.0%" of GDP, translating to a government general bond issuance quota of RMB5.7 trillion [10][19]. - The quotas for central and local government special bond issuances have missed expectations, indicating a smaller-than-expected government funding arrangement for bank recapitalization and consumer goods trade-in programs [8][16]. Economic Targets - The GDP growth target for 2025 is set at "around 5%", unchanged from 2024, while the CPI inflation target has been reduced from "around 3%" to "around 2%" [2][19]. - The fiscal deficit ratio is projected at 4.0% of GDP, with a total government bond net issuance quota of RMB11.9 trillion for the year, which is above the previous year's quota but below market expectations [10][19]. - The local government special bond (LGSB) net issuance quota is set at RMB4.4 trillion, aimed at infrastructure investment and local government debt resolution [10][19]. Labor Market - The target for new urban job creation remains at "above 12 million", consistent with the number of college graduates expected this year [9][19]. - The surveyed unemployment rate target is maintained at "around 5.5%", slightly above the current level of 5.2% [9][19]. Policy Directions - Policymakers have emphasized boosting consumption, advancing high-tech manufacturing (including AI), and stabilizing the property sector, although specific measures are still lacking [12][16]. - The government plans to increase the minimum standard of basic pension for urban and rural residents and enhance childcare services to support consumption [13][16]. - There is a commitment to reduce energy intensity by 3.0% this year, with a focus on high-tech manufacturing and digital technology adoption [12][16]. Upcoming Events - Key upcoming events during the "Two Sessions" include the fiscal budget report and interviews with key ministers, which may provide further insights into policy implementation [16][29].

Main points: China: Two Sessions Comment 2: Fiscal expansion to do (most of) the heavy lifting for stabilizing growth Bottom line: The 2025 fiscal targets unveiled during the "Two Sessions" imply the total amount of government bond net issuance quota will increase to RMB11.9tn in 2025 from RMB9.0tn in 2024. According to the 2025 budget report proposal, the MOF expects fiscal revenue growth to slow, but fiscal expenditure growth to increase, both by a moderate degree. We see downside risk to the MOF projecti ...

6 March 2025 | 10:18PM HKT China: Two Sessions Comment 3: Top policymakers reiterated supportive stance and provided some more implementation details Bottom line: This afternoon (6 March), the heads of the National Development and Reform Commission (NDRC), Ministry of Finance (MOF), Ministry of Commerce (MOFCOM), PBOC and China Securities Regulatory Commission (CSRC) held a joint press conference on 2025 economic policies. Top policymakers reiterated their supportive stance and provided some more implementa ...

Investment Rating - The report does not explicitly provide an investment rating for the industry but highlights significant revenue growth in AI infrastructure-related companies, indicating a positive outlook for investment opportunities in this sector [2][3]. Core Insights - There is a notable divergence between the annualized revenue growth of public companies involved in AI infrastructure, which increased by over $340 billion from 2022 to Q4 2024, and the real investment in AI-related categories in the US GDP, which only rose by $42 billion during the same period [2][3]. - The report suggests that a substantial portion of the revenue increase is attributed to cost inflation and foreign revenue, which do not contribute to real GDP growth [6][9]. - Methodological issues in the US national accounts may lead to an underestimation of the impact of AI-related investments on real GDP, with an estimated potential understatement of around $100 billion [2][10]. Summary by Sections Revenue Growth - Annualized revenue for public companies exposed to AI infrastructure build-out increased by over $340 billion from 2022 through Q4 2024, with projections suggesting a further increase to $580 billion by the end of 2025 [2][3]. - The increase in real investment in AI-related categories in the US GDP accounts was only $42 billion during the same period, raising questions about the apparent disconnect between revenue and GDP growth [3][4]. Cost Inflation and Foreign Revenue - A significant portion of the revenue increase is driven by cost inflation, particularly in semiconductors, and foreign sales, which account for nearly half of the reported AI spending surge [6][9]. - Margin expansion is estimated to explain around $30 billion of the overall revenue increase, with foreign revenue contributing approximately $130 billion [9][17]. Methodological Considerations - The report discusses the commodity-flow approach used in US national accounts, which may misclassify semiconductor purchases as intermediate inputs rather than investments, leading to an underrepresentation of actual investment in GDP [11][12]. - The surge in cloud services used for AI model training is also likely underreported in GDP calculations due to their classification as intermediate inputs [14][15]. - The report concludes that while there is potential for AI-related investment to provide a moderate boost to real US GDP in 2025, much of the investment in semiconductors and cloud computing will likely remain unmeasured unless there are changes in national accounting methodologies [22].

7 March 2025 | 7:37AM HKT The 720: JD.com, China Two Sessions, China Brokers, Adani Port, Asics, Ryohin Keikaku, SK Hynix, European Strategy In Focus | JD.com Caleb Chan +852-2978-0790 | caleb.chan@gs.com Goldman Sachs (Asia) L.L.C. c45a43530f604d12bcb9a82b5aa6b9f6 Goldman Sachs The 720 JD.com - 4Q24 First Take: Strong beat with JD Retail market share gains; eyes on 2025 outlook - Buy (on CL). JD reported strong 4Q24 results beat above GS and sell-side estimates (V.A.) across top line, profit growth and fre ...