10 September 2025 China Macro Tracker Economics Anti-involution to help longer-term development Policy: MIIT plans support anti-involution and promote long-term growth The MIIT (Ministry of Industry and Information Technology) is focusing on longer-term high-quality growth with support for key areas and anti-involution measures. Firstly, MIIT and SAMR issued an action plan for the development of the electronic information manufacturing sector in 2025 and 2026 on 4 September (Gov.cn, 4 September). This inclu ...

Summary of Key Points from the Conference Call Industry Overview - **Industry**: Chinese Economy and Macro Environment - **Key Focus**: Economic growth, monetary policy, property sector stabilization, and demand-side measures Core Insights and Arguments 1. **Slower Growth and Demand-Side Measures**: July economic data indicated a slowdown in growth momentum, with a month-on-month contraction in new bank lending and weaker investment and retail sales. This may lead to a faster rollout of demand-side measures to support growth in H2 [2][7] 2. **Policy Support for Private Economy**: President Xi emphasized the need for measures to promote the private economy, including fair competition and settling local government arrears. Special local government bonds (SLGBs) are being used to accelerate repayments to private firms [3][7] 3. **Property Sector Stabilization**: The central government may take a more active role in stabilizing the property sector, with reports suggesting that state-owned enterprises (SOEs) may be asked to purchase unsold homes to clear excess inventories [4][8] 4. **Monetary Policy Stance**: The People's Bank of China (PBoC) maintained a moderately accommodative monetary policy, focusing on structural support for the real economy. There is an expectation of further monetary easing, including interest rate cuts and liquidity support [9][11] 5. **Targeted Support for Real Economy**: The PBoC's report highlighted the need for targeted support in areas such as technology, green development, and inclusive finance, which now account for approximately 70% of new loans [10][11] 6. **Weakness in Property Data**: July property data showed significant declines, with property investment falling at the fastest pace since November 2022. This has prompted calls for solid measures to stabilize the sector [8][9] 7. **Consumer Confidence and Spending**: Structural measures aimed at improving household and corporate confidence are crucial for reviving consumer spending and corporate investment [2][3] Additional Important Insights 1. **Debt Swap Programs**: The ongoing debt swap programs are expected to help replenish cash flows for private firms, enhancing their confidence in the market [3][7] 2. **High Frequency Data**: Primary home sales in 30 large cities fell approximately 15% year-on-year in August, indicating continued weakness in the property market [8][9] 3. **Interbank Rate Trends**: Interbank rates have edged down, reflecting the PBoC's efforts to maintain liquidity in the financial system [12][11] 4. **Container Shipping Costs**: Container shipping costs on China-Eastern US routes have declined further, impacting trade dynamics [70][11] This summary encapsulates the critical points discussed in the conference call, focusing on the economic landscape, policy measures, and sector-specific insights that could influence investment decisions.

Core Viewpoint - Lufax Holding Ltd announced the resignation of Mr. Weidong Li as an independent non-executive Director and the appointment of Ms. Wai Ping Tina Lee to the same position, effective August 14, 2025, reflecting changes in personal work commitments and the company's ongoing governance adjustments [1][2]. Group 1: Management Changes - Mr. Weidong Li resigned from his roles as an independent non-executive Director, member of the Audit Committee, and chairman of the Nomination and Remuneration Committee due to personal work arrangements [1]. - Ms. Wai Ping Tina Lee has been appointed as an independent non-executive Director and a member of both the Audit Committee and the Nomination and Remuneration Committee, effective August 14, 2025 [2][4]. - Mr. David Xianglin Li also resigned as a member of the Nomination and Remuneration Committee, leading to the appointment of Mr. Dicky Peter Yip as the new chairman of that committee [4]. Group 2: Profile of New Director - Ms. Wai Ping Tina Lee, aged 63, has over 40 years of experience in legal and banking sectors, previously holding senior legal positions at The Hongkong and Shanghai Banking Corporation Limited from 2001 to 2023 [3]. - Her career includes roles such as Senior Legal Counsel and Regional Head of Legal for Commercial Banking in Asia Pacific, showcasing her extensive expertise in financial services [3]. - Ms. Lee's educational background includes a Professional Diploma in Business Studies (Banking) and legal qualifications from Hong Kong University SPACE and Manchester Metropolitan University [3]. Group 3: Company Overview - Lufax is recognized as a leading financial services enabler for small business owners in China, offering financing products tailored to their needs [5]. - The company has established partnerships with 85 financial institutions in China, many of which have collaborated with Lufax for over three years [5].

Investment Rating - The report does not explicitly provide an investment rating for the industry Core Insights - Domestic consumption in China is showing signs of improvement, particularly driven by extended sales periods and trade-in programs during shopping festivals [5][10] - The ongoing tensions in the Middle East have led to fluctuations in oil prices, with expectations for Brent crude to stabilize around USD65 per barrel by Q4 2025 if de-escalation occurs [2][4] - The impact of oil price shocks is expected to have a mixed effect on different sectors, with a potential drag on real GDP growth and increases in CPI and PPI [4] Summary by Sections Oil Market - Approximately 18% of China's energy consumption is derived from crude oil, with about 70% of this being imported [3] - The Strait of Hormuz is crucial for China's oil imports, accounting for over 40% of its crude oil shipments [3] - A 10% increase in Brent crude oil prices could reduce real GDP growth by approximately 0.1 percentage points while increasing headline CPI and PPI by around 0.3 and 1.3 percentage points respectively over a year [4] Consumption Trends - The "618" shopping festival in 2025 saw a 15% year-on-year growth in gross merchandise value (GMV), a significant recovery from a 7% decline in 2024 [5] - Trade-in programs contributed approximately RMB380 billion in sales, representing 9% of monthly retail sales in May [5][10] - Service consumption is expected to grow, with events like the Jiangsu Urban Football League driving increased spending in culture and tourism [11] Fiscal Policy and Support - Fiscal spending has focused on improving livelihoods, with social security and education spending rising by 9.2% and 6.7% year-on-year respectively in the first five months of 2025 [13] - The government plans to allocate additional subsidies for trade-in programs, with a total of RMB138 billion earmarked for localities in the coming months [10] - The Lujiazui Forum highlighted China's commitment to financial reforms, including RMB internationalization and technological innovation [15] Real Estate and Land Sales - The property sector remains weak, with property investment down 12% year-on-year in May, affecting land sales revenue which decreased by 11.9% in the first five months [14][47] - New home sales in Tier-1 cities have also seen a year-on-year decline, indicating ongoing challenges in the real estate market [42][52] Economic Activity Indicators - Various economic indicators such as the operating rates in the steel and chemical sectors have shown stability, while coal consumption in major provinces has increased seasonally [16][25][26] - National box office revenues rose by 12%, reflecting a recovery in entertainment consumption [32]

Investment Rating - The report indicates a strong year-to-date return performance for emerging markets (EM) local debt, suggesting a favorable investment outlook despite recent geopolitical risks and rising oil prices [9]. Core Insights - Foreign demand for Korea government debt remains robust, with inflows of USD8.2 billion in May 2025, following USD7.9 billion in April [13]. - Emerging markets are experiencing a shift in foreign investment patterns, with stronger inflows into low yielders like Korea, contrasting with outflows from high yielders [9][10]. - Mexico government debt has seen significant outflows, totaling approximately USD4 billion in 2Q25, indicating a decline in foreign interest [11][12]. Summary by Sections Foreign Capital Flows - Inflows into Korea government debt reached USD8.2 billion in May, with notable investments in Korea Treasury Bonds (KTBs) [13]. - Malaysia government debt attracted USD3 billion in inflows in May, up from USD2.3 billion in April, indicating strong foreign interest [14]. - Colombia government debt saw an increase of USD436 million in foreign holdings in May, contrasting with previous months [15]. Emerging Markets Trends - The report highlights a strong performance of EM local debt, with a focus on positioning for lower rates in low yielders [9]. - Foreign investors increased their holdings in Indonesia and Hungary, while outflows were noted from India, Thailand, and South Africa [10]. - The report emphasizes the importance of geopolitical stability and economic indicators in shaping future investment flows into EM sovereign debt [9].

Investment Rating - The report does not explicitly provide an investment rating for the industry. Core Insights - The success of China-US trade talks is focused on stabilizing the truce, with potential for reduced export controls, but significant breakthroughs on trade issues may take time [3] - China has announced new guidelines to support people's livelihoods, emphasizing social welfare coverage and targeted support for low-income groups, youth, and gig workers [8][9] - The People's Bank of China (PBoC) injected RMB1 trillion into the banking system to address liquidity needs, indicating a proactive approach to economic stability [13] Summary by Sections Trade Relations - Recent China-US trade tensions have led to high-level talks aimed at addressing export controls, with both sides showing willingness to negotiate [2][3] - China's exports to the US have seen a decline, but high-frequency data indicates a rebound in container exports, suggesting recovery from tariff impacts [4][62] Domestic Policies - China released 10-point guidelines to improve social welfare, including childcare subsidies and minimum wage increases, aimed at enhancing living standards [9][11] - The government plans to allocate RMB158.7 billion in fiscal support for low-income households, indicating a commitment to social safety nets [12] Economic Activity - The operating rates in various sectors, such as semi-steel tyres and chemicals, show mixed trends, with some sectors experiencing a decline while others see growth [14][16] - National box office revenues and postal delivery volumes have shown fluctuations, reflecting broader economic activity [32][30] Financial Measures - The PBoC's liquidity injection is a response to a maturity wall of interbank NCDs and ongoing government bond issuance, highlighting the need for immediate liquidity support [13] - Interbank rates have remained low, indicating a stable financial environment [29] Housing Market - New home sales in Tier-1 cities have started to rebound, while second-hand home sales in major cities have also seen an uptick, suggesting a recovery in the housing market [43][45] - Land sales remain below historical levels, indicating cautious market sentiment [47] Consumer Behavior - The report highlights the need for improved business confidence to stabilize employment, particularly for the youth entering the job market [12] - Consumer spending patterns are influenced by government policies aimed at boosting disposable incomes and consumption [10]

Summary of Key Points from the Conference Call Industry or Company Involved - The discussion primarily revolves around the economic comparisons between **China** and **Japan**, particularly focusing on Japan's economic history and its implications for China's current economic situation. Core Insights and Arguments 1. **Economic Parallels**: China is facing challenges similar to those Japan encountered during its economic downturns in the 1980s and 1990s, including rising trade frictions, a deflating property bubble, and high debt levels [2][3][7]. 2. **Growth Potential**: Despite these challenges, China's growth potential remains significantly higher than Japan's, with opportunities for catch-up in per capita income and productivity [3][7]. 3. **Lessons from Japan**: Three key lessons from Japan's experience are highlighted for China to avoid stagnation: - **Fiscal Stimulus**: Japan's cautious fiscal response post-bubble was insufficient. China needs to implement more substantial fiscal measures to boost consumer confidence and combat deflation [30][33]. - **Monetary Easing**: Japan's slow monetary easing contributed to prolonged deflation. China must ensure that its monetary policy is sufficiently accommodative to stimulate growth [44][50]. - **Structural Reforms**: Japan's delayed action on bad debts hindered recovery. China must address its non-performing loans and implement structural reforms to enhance productivity and consumption [56][61][80]. Additional Important Content 1. **Trade Imbalances**: The report discusses the structural imbalances in global trade, emphasizing that China must reduce its investment and increase domestic consumption to alleviate trade tensions with the US [9][10]. 2. **Demographic Challenges**: Both countries face demographic issues, with an increasing proportion of elderly citizens, which could impact economic growth [20][24]. 3. **Consumer Confidence**: China's consumer confidence is currently weak, and the report suggests that without proactive measures, this could lead to entrenched deflation similar to Japan's experience [30][49]. 4. **Debt Management**: China is actively working on managing local government debt and has implemented measures to address bad debts, but more aggressive actions may be necessary [62][63]. 5. **Emerging Technologies**: The report notes that China has the potential to leverage advancements in technology, particularly in AI, to drive productivity gains and economic growth [79][80]. This summary encapsulates the critical insights and recommendations from the conference call, focusing on the economic dynamics between China and Japan and the lessons that can be applied to China's current economic strategy.

Asia Economics Comment Economics China and the 'tariff cascade' China Trade tensions between the US and China cast a wide shadow. Bilateral trade is bound to suffer, of course, even if tariffs may be rolled back under an eventual deal. However, the bigger issue for China, and arguably the world, is whether restrictions will also be imposed by other economies on Chinese imports. Two mechanisms are at play. One, competitive pressure from US-diverted Chinese shipments could raise protectionist demands. Two, th ...

Summary of Key Points from the Conference Call Industry Overview - The report compares the financial asset pools in China and the US, focusing on bank deposits, property, bonds, and equities, highlighting the wealth effects generated since 2010 [2][10][70]. Core Insights 1. **Financial Asset Pools**: - China leads in bank deposits with USD 32 trillion compared to USD 18 trillion in the US [3][12]. - Property assets in China peaked at 76% of the US level in 2020 but fell to 59% in 2024 due to a correction in the real estate market [3][13]. - The bond market in China has been catching up, reaching 45% of the US bond market by 2024, up from 11% in 2010 [3][14]. - The equity market capitalization of China A and H-shares has decreased from 53% of the S&P 500 in 2015 to 30% by February 2025 [3][17]. 2. **Wealth Effect**: - Cash distributions from equity assets in China exceeded coupon payments on RMB bonds by 32% in 2024, indicating a shift in wealth generation [4][33]. - The "paper wealth" generated by Chinese equities from 2010 to February 2025 was only 8% of that created by the S&P 500 during the same period, suggesting a weaker wealth effect from Chinese equities [4][36]. 3. **Bond Market Implications**: - The bond market in China is expected to provide stability, but its ability to generate wealth effects is questioned due to low interest rates [5][61]. - Policymakers may seek alternative avenues if the bond market fails to deliver the desired wealth effect, emphasizing the importance of equity performance in influencing bond market dynamics [5][61]. 4. **Comparative Analysis**: - The report highlights that while China has a larger pool of deposits and property, the US has a greater inclination towards equities and bonds [7][10]. - The performance of equity assets is becoming a critical risk factor for bond performance in China [7][11]. Additional Important Insights - The report notes that the cash distribution from Chinese equity assets has risen from 20% of the US level in 2010 to 37% in 2024, while coupon distributions from Chinese bonds have decreased from 34% to 22% of the US level during the same period [34]. - The significant losses in property assets, amounting to USD 6.1 trillion from 2022 to 2024, have overshadowed the cash distributions from equity and bond assets, contributing to a risk-off sentiment among Chinese households [38][39]. - The report concludes that there is potential for further financialization in China, particularly in equity assets, which have lagged behind other asset classes [70][71]. This comprehensive analysis provides insights into the evolving landscape of financial assets in China compared to the US, highlighting the implications for investors and policymakers alike.