Western Securities·2025-12-30 13:05Group 1 - The report indicates that China is entering a period of prosperity similar to Japan in 1978, driven by high industrial value added and export ratios, along with continued trade surpluses and wage growth [1][11] - The cash flow statements of the real economy in China have been damaged from 2022 to 2024 due to the Fed's interest rate hikes and a decline in real estate prices, leading to capital outflows and reduced cash flow [2][12] - The resumption of the Fed's interest rate cuts is expected to reverse the outflow of cross-border capital, thereby repairing the cash flow statements of enterprises and households [3][13] Group 2 - The report emphasizes the necessity of debt restructuring in China, drawing parallels with Japan's experience in the 1990s, where failure to act led to prolonged economic stagnation [4][14] - The potential for the Fed's quantitative easing (QE) to provide the necessary liquidity for China's central bank to undertake debt restructuring is highlighted, which could alleviate external constraints on the yuan [4][14] - The year 2026 is projected to mark the beginning of a new prosperity phase for China's economy, with a cyclical shift expected in manufacturing and consumption sectors [6][15] Group 3 - The report recommends a selection of stocks for January 2026, including Huafeng Aluminum, Zijin Mining, and TCL Technology, among others, indicating a focus on sectors poised for growth [9][10] - The automotive sector is highlighted, with Great Wall Motors and Leap Motor being noted for their strategic positioning in high-end and global markets [32][38] - In the chemical sector, Dongfang Tower is recognized for its growth potential driven by increasing potassium and phosphorus production [41][43]