Western Securities(SZ:002673) Western Securities·2025-07-08 11:33Group 1: Economic Rebalancing - The current state of China's economy is characterized by a need for internal and external rebalancing, with a focus on addressing supply-demand imbalances to alleviate downward price pressures and achieve re-inflation[15] - The trade surplus as a percentage of GDP is projected to be 5.2% in 2024, indicating a persistent external imbalance[19] - The consumer spending rate in China has increased from 34% in 2010 to 39% in 2023, but still lags behind developed economies, necessitating further reforms to boost consumption[15] Group 2: Policy and Market Outlook - The macroeconomic forecast for 2025 predicts a GDP growth rate of 5.1%, consistent with the 2024 growth rate, with nominal GDP expected to grow by 4.2%[3] - A potential interest rate cut is anticipated in the second half of the year, with the possibility of the RMB appreciating to around 7.02 CNY/USD by year-end[4] - The "反内卷" (anti-involution) policy is expected to drive supply-side reforms, aiming to reduce excess capacity and improve market efficiency[2] Group 3: Inflation and Price Trends - CPI is expected to decline by 0.1% in 2025, while PPI is projected to decrease by 2.6%, indicating ongoing deflationary pressures[3] - The GDP deflator is forecasted to drop by 0.8%, reflecting a continued trend of negative growth in nominal terms[3] - The PPI has been in a deflationary state for 32 months, which has negatively impacted corporate profits, with industrial profits down over 1% in the first five months of the year[27]