Core Insights - The report highlights the increasing volatility in international financial markets and the complex geopolitical situation, which poses significant external risks to China's economy [1] - China's economy is showing resilience and stability, with a focus on high-quality development and proactive macroeconomic policies [1] Economic Performance - In the first half of 2025, China's current account surplus reached $294.1 billion, remaining within a reasonable equilibrium range [2] - The total import and export volume of goods increased by 2% year-on-year, while service trade grew more actively with a 6% increase in service imports and exports [2] - Investment income improved, with China's outbound investment income and foreign investment income in China growing by 13% and 7% respectively [2] Financial Stability - By the end of June 2025, China's foreign financial assets and liabilities exceeded $11 trillion and $7.2 trillion respectively, resulting in a net foreign asset of $3.8 trillion, a 16% increase from the end of 2024 [2] - The non-reserve financial account deficit and current account surplus formed a self-balancing pattern, indicating a stable investment environment [2] Future Outlook - The report anticipates continued challenges from a complex external environment and downward pressure on the global economy, but expects the current account to maintain a reasonable equilibrium [3] - China's efforts to establish a new development pattern and enhance macroeconomic policy effectiveness are expected to support stable international payments [3] - The foreign exchange management department will implement policies to ensure a more convenient, open, secure, and intelligent foreign exchange management system [3]

Group 1 - The People's Bank of China emphasizes the need for stable economic growth and reasonable price levels, maintaining policy continuity while enhancing flexibility and foresight [1] - The meeting highlights the weakening momentum of global economic growth and uncertainties in inflation trends and monetary policy adjustments, while acknowledging domestic challenges such as insufficient demand and low price levels [1] - The meeting calls for the implementation of a moderately loose monetary policy and strengthening of counter-cyclical adjustments, with a focus on the effectiveness of policy measures [1] Group 2 - The meeting encourages the use of securities, funds, and insurance company swap facilities, as well as stock repurchase and increased loans to maintain capital market stability [2] - There is a continued emphasis on stabilizing the real estate market and ensuring the effectiveness of previously introduced financial policies [2] - The meeting urges large banks to play a key role in serving the real economy while encouraging small and medium-sized banks to focus on their core responsibilities and enhance capital strength [2]

Macro and Market News - President Xi Jinping and US President Trump had a phone call discussing the current state of US-China relations and strategic guidance for future development [2] - The Chinese government emphasizes the importance of mutual respect and cooperation in resolving issues, particularly regarding TikTok [2][4] - The State Council held a meeting to discuss the implementation of domestic product standards in government procurement, aiming to ensure fair competition [2] Company News - The IPO of Moer Thread will be reviewed on September 26, 2025, focusing on the development of GPU chips and related products [14] - Sunflower plans to acquire 100% equity of Xipu Materials and 40% equity of Beid Pharmaceutical, with its stock resuming trading on September 22, 2025 [17] - Absolute Food reported that it failed to disclose revenue accurately from 2017 to 2021, leading to a change in its stock name to "ST Absolute" starting September 23, 2025 [18][19] - ST New Power is under investigation by the China Securities Regulatory Commission for suspected information disclosure violations [20] - Fudan Fuhua reported inflated profits in its annual reports from 2019 to 2023, leading to a name change to "ST Fuhua" starting September 23, 2025 [20] - Creative Information reported overstatement of revenue in its 2022 and 2023 reports, resulting in a name change to "ST Creative" starting September 23, 2025 [21] Industry News - The National Medical Insurance Administration released the 11th batch of centralized drug procurement, emphasizing principles of clinical stability and quality assurance [10] - The Ministry of Industry and Information Technology is preparing a development plan for the new battery industry to prevent low-level redundant construction [11] - Some banks are experiencing tight supply of large-denomination certificates of deposit with interest rates exceeding 2% [12]

Core Insights - The foreign exchange market in China showed a robust performance in July, with a settlement surplus of 22.8 billion USD, indicating market resilience and stability [1][3][4] Group 1: Market Performance - In July, banks settled 233.6 billion USD and sold 210.8 billion USD, resulting in a settlement surplus of 22.8 billion USD [1] - The settlement and sales volumes increased by 12% and 16% respectively compared to the previous month, maintaining a surplus trend [3] - The cross-border income and expenditure of non-bank sectors reached historical highs, reflecting a balanced state of receipts and payments [5] Group 2: Market Expectations - Market participants exhibited rational behavior, with a slight increase in settlement willingness and stable sales willingness, supporting stable market expectations [4] - The active trading environment indicates enhanced confidence among various market participants despite increased volatility in the international foreign exchange market [4] Group 3: Cross-Border Capital Flows - The cross-border capital flow remained stable, with a slight deficit of 0.077 billion USD in July, indicating no significant inflow or outflow [5] - The net inflow from goods trade increased by 33% month-on-month, showcasing strong performance in foreign trade and improved international competitiveness [5] - Cumulative surplus of 119.5 billion USD in cross-border receipts and payments over the first seven months further confirms the stability and sustainability of capital flows [5]

Core Points - The State Administration of Foreign Exchange (SAFE) held a video conference to discuss foreign exchange management work for the second half of 2025, focusing on reform, risk prevention, and regulatory enhancement [5][7]. Group 1: Reform and Development - Deepening reforms in the foreign exchange sector to support stable foreign trade and promote cross-border investment and financing facilitation [2][11]. - Enhancing the convenience of foreign exchange settlement for quality enterprises and expanding pilot programs for cross-border trade [8][11]. - Implementing a series of policies to optimize foreign exchange management for new trade entities and support regional development initiatives [11]. Group 2: Risk Management - Strengthening monitoring and analysis of foreign exchange conditions to mitigate external shocks and maintain market stability [2][11]. - Conducting counter-cyclical adjustments as necessary to safeguard economic and financial security [11]. Group 3: Regulatory Enhancement - Improving regulatory capabilities under open conditions, including legal construction and the use of technology to enhance regulatory efficiency [2][11]. - Strengthening the legal framework for foreign exchange management and combating illegal cross-border financial activities [8][11]. Group 4: International Balance of Payments - Advancing the construction of the international balance of payments statistical system [3][11]. - Developing the implementation plan for the seventh edition of the "Balance of Payments and International Investment Position Manual" [11]. Group 5: Overall Management Improvement - Aiming to enhance the overall level of foreign exchange management through better policy evaluation and tracking [4][11]. - Promoting the development of digital and intelligent foreign exchange management systems [11].

Core Viewpoint - The State Administration of Foreign Exchange emphasizes the importance of preventing and mitigating external shock risks while maintaining foreign exchange market stability and national economic and financial security [1] Summary by Relevant Categories Foreign Exchange Management - The meeting highlighted the need for enhanced monitoring and analysis of foreign exchange conditions [1] - It called for strengthening macro-prudential management of cross-border capital flows and guiding expectations [1] Economic Stability - The administration plans to implement counter-cyclical adjustments as necessary to ensure stability in the foreign exchange market [1] - The focus is on safeguarding the overall economic and financial security of the country [1]

Group 1 - The core viewpoint of the articles is that China's foreign exchange market performed better than expected in the first half of the year, with stable foreign capital allocation in RMB assets and a positive outlook for future investment [1][3][6] - The foreign exchange market showed strong resilience and vitality, with five key features: steady increase in foreign-related income and expenditure, continued net inflow of cross-border funds, basic balance in supply and demand, active market trading, and stable foreign exchange reserves [1][6] - The RMB exchange rate remained stable, appreciating by 1.9% against the USD in the first half of the year, fluctuating between 7.15 and 7.35, which helped stabilize the macro economy and international payments [1][6] Group 2 - Foreign capital's allocation in RMB assets is expected to have sustainable growth potential, with foreign holdings of domestic RMB bonds exceeding $600 billion, and a net increase of $10.1 billion in domestic stocks and funds in the first half of the year [3][4] - The international balance of payments is maintaining basic equilibrium, with a steady increase in the current account surplus and a corresponding financial account deficit, indicating a self-balancing pattern [2][6] - Three factors are expected to support the continued stable operation of the foreign exchange market: robust economic fundamentals, steady progress in opening up to the outside world, and enhanced resilience of the foreign exchange market [6][7]

Core Viewpoint - The article discusses the stability and resilience of China's foreign exchange market in the context of a complex global economic environment, highlighting key factors that support this stability, including economic growth, high-level opening up, and enhanced market resilience [3][5]. Economic Performance - China's GDP grew by 5.3% year-on-year in the first half of the year, with domestic demand contributing 77% to economic growth, an increase of 17 percentage points from the previous quarter [3]. - The service trade deficit decreased by 14%, with service trade income growing by 13% and cross-border travel income increasing by 42% [10]. Foreign Exchange Market Dynamics - In the first half of the year, there was a net inflow of $127.3 billion from non-bank sectors, continuing the trend from the second half of the previous year, with a 46% increase in net inflow in the second quarter [6]. - The total net increase in foreign investment in domestic stocks and bonds was $10.1 billion, reversing the net selling trend of the past two years [7]. - The RMB appreciated by 1.9% against the USD in the first half of the year, maintaining stability within a range of 7.15 to 7.35 [12]. Foreign Investment Trends - Foreign investors' holdings of domestic RMB bonds exceeded $600 billion, indicating a stable investment environment [7]. - A survey indicated that 30% of global central banks plan to increase their allocation of RMB assets, reflecting the asset's appeal for diversification and risk management [8]. Banking Sector Developments - Six new banks initiated foreign exchange business reforms in the first half of the year, bringing the total to 22 banks involved in these reforms [9]. - The total volume of foreign exchange transactions in the domestic RMB market reached $21 trillion, a year-on-year increase of 10.2% [14]. Overall Market Activity - The total scale of foreign-related income and expenditure reached $7.6 trillion, marking a historical high for the same period [16]. - The combined scale of bank settlements and sales of foreign exchange was $2.3 trillion, the second-highest for the same period historically [15].

Core Insights - The foreign exchange market in China is expected to maintain stable and sustainable growth for foreign investment in RMB assets, with confidence in the ability to ensure a robust market operation [1][5] Group 1: Foreign Exchange Market Performance - In the first half of 2025, the foreign exchange market showed resilience, with record high cross-border income and expenditure from non-bank sectors [1] - There is no significant unilateral expectation for the appreciation or depreciation of the RMB, indicating rational and orderly market trading [2] Group 2: Investment Trends - From January to May 2025, net inflows of direct investment in equity from foreign sources reached $31.1 billion, a year-on-year increase of 16% [3] - Foreign investment in RMB-denominated bonds has increased, with foreign holdings exceeding $600 billion, and net foreign purchases of domestic stocks and funds amounted to $10.1 billion in the first half of 2025 [4] Group 3: Policy Initiatives - The State Administration of Foreign Exchange plans to promote innovative policies across more free trade zones to enhance cross-border trade and investment [6] - Policies include optimizing international trade settlement and expanding the scope of trade revenue and expenditure netting [6]

Report Industry Investment Rating No relevant content provided. Core Viewpoints - The production industry should focus on policies promoting the transformation of traditional manufacturing. The State-owned Assets Supervision and Administration Commission of the State Council emphasizes the transformation and upgrading of traditional industries, and the National Development and Reform Commission has raised domestic gasoline and diesel prices [1]. - The foreign exchange market in May 2025 was stable, with a net inflow of cross - border funds of 33 billion US dollars in the non - bank sector, including high - level net inflows from goods trade and increased foreign investment in domestic stocks [2]. - In the industry overview, international oil prices have rebounded significantly, PTA prices have continued to rise, and egg prices have continued to decline. The urea operating rate is at a high level. The sales of commercial housing in first - and second - tier cities are at a near - three - year low, and the number of domestic flights has decreased. The credit spreads of the pharmaceutical and biological, and agricultural industries have declined [3][4][5][6]. Summary by Related Catalogs 1. Meso - level Event Overview Production Industry - The State - owned Assets Supervision and Administration Commission of the State Council promotes the high - end, intelligent, and green transformation of traditional industries, and encourages the use of digital technologies and relevant policies [1]. - The National Development and Reform Commission raised domestic gasoline prices by 260 yuan/ton and diesel prices by 255 yuan/ton on June 17 [1]. Service Industry - In May 2025, the non - bank sector had a net cross - border capital inflow of 33 billion US dollars, with stable net outflows in service trade, etc. [2] 2. Industry Overview Upstream - Energy: International oil prices have rebounded significantly [3]. - Chemical: PTA prices have continued to rise [3]. - Agriculture: Egg prices have continued to decline [3]. Mid - stream - Chemical: The urea operating rate is at a high level [4]. Downstream - Real Estate: The sales of commercial housing in first - and second - tier cities are the same as last year and at a near - three - year low [5]. - Service: The number of domestic flights has decreased [5]. 3. Market Pricing - The credit spreads of the pharmaceutical and biological, and agricultural industries have declined [6].