Investment Rating - The report indicates a positive outlook for M1 growth, suggesting a potential upward trend in the coming quarters [11][35]. Core Insights - M1 growth showed a rebound trend in Q4 2024, but experienced a decline again in early 2025 due to the Spring Festival effect. The report explores the factors driving M1 growth changes and whether a new upward trend has begun [11][35]. - The report identifies five key factors influencing M1 growth: fiscal policy, monetary policy, entity activity, financial system, and external factors. It highlights that fiscal policy has become the primary driver of M1 growth, especially in 2024 [20][35]. - The report emphasizes that the contribution of entity demand to M1 growth has weakened significantly since 2018, while fiscal policy's contribution has increased, reaching 7.3 percentage points in 2024 [35][41]. Summary by Sections 1. Changes in M1 - M1 growth rebounded starting October 2024, reaching 1.2% in December, but slowed to 0.4% in January 2025. The government bond issuance accelerated from August 2024, contributing to M1's recovery [11][12][35]. - The new M1 calculation includes personal demand deposits, which smooths out the impact of seasonal factors like the Spring Festival [11][13][35]. 2. Factors Driving M1 Growth: Insights from the Five-Factor Model - The report notes that the average annual contribution of entity demand to M1 growth has dropped to 2.2 percentage points in 2024, compared to an average of 10 percentage points from 2018 to 2021 [20][35]. - The financial system's contribution to M1 growth has been negative in recent years, reflecting the drag from interbank fund circulation [35][41]. 3. Is M1 Entering an Upward Cycle? - Historical data shows that M1 growth has typically rebounded significantly during previous cycles, with increases of over 10 percentage points lasting more than a year [41][45]. - The report suggests that while fiscal policy may drive M1 growth, the current recovery in entity demand remains weak, and the central bank's monetary policy focus is on stabilizing bank interest margins rather than large-scale liquidity injections [45][49].