Core Viewpoint - The article highlights that large-denomination certificates of deposit (CDs) are not an ideal wealth management choice in the current economic environment, revealing four core contradictions that investors should be aware of [1]. Group 1: Interest Rate Trends - The downward trend in interest rates is irreversible, with large-denomination CD rates generally reduced by 20-50 basis points in 2023, and three-year products yielding below 3% [3]. - Investors locking in long-term CDs may miss out on potentially higher future returns, as some banks have introduced "segmented interest" clauses that significantly reduce interest upon early withdrawal [3]. Group 2: Liquidity Issues - Although large-denomination CDs can be transferred, secondary market trading often results in significant discounts, undermining the advertised liquidity [5]. - Certain banks have imposed restrictions on partial redemptions, limiting daily withdrawals to 5% of the principal, which can delay full liquidation for up to 20 working days [5]. Group 3: Hidden Costs and Inflation - The apparent 3% yield may not outpace inflation when considering opportunity costs, with alternative investments potentially offering higher returns [8]. - A survey indicated that 73% of investors were recommended additional products when purchasing large-denomination CDs, with 28% ultimately buying unnecessary financial products [8]. Group 4: Outdated Wealth Management Strategies - The reliance on traditional wealth management paths is seen as a risk, as the safety advantage of large-denomination CDs diminishes in the context of low-risk returns compared to GDP growth [9]. - Financial experts suggest a diversified asset allocation strategy, recommending that the proportion of funds allocated to deposits should not exceed 50% [9]. Group 5: Alternative Strategies - A "three-three" strategy is proposed for risk-averse investors, involving staggered investments in government bonds to maintain liquidity and smooth interest rate fluctuations [11]. - Cash management tools like money market funds offer better short-term returns while maintaining liquidity, with annualized yields typically between 2.2%-2.8% [11]. Group 6: Future Regulatory Changes - The implementation of the "Commercial Bank Liability Quality Management Measures" in June 2025 will further diminish the interest rate advantages of large-denomination CDs, as banks will be restricted from using high-interest rates to attract deposits [13]. Group 7: Long-term Risks - In a low-interest-rate environment, the real risk is not short-term volatility but the continuous depreciation of purchasing power, emphasizing the need for diversified asset allocation to achieve reasonable returns [14].

Core Viewpoint - The real estate market is experiencing significant price declines, with many homeowners facing the challenge of high mortgage payments despite the drop in property values [3][5][11] Market Conditions - In the first half of 2025, 53 out of 70 major cities reported new home prices lower than the previous year, with 16 cities experiencing price drops of over 30% [3] - The transaction volume for high-end properties (over 10 million) has decreased by more than 60% compared to the previous year, while the number of sellers has increased by nearly 50% [3][5] - The average time to sell properties in first and second-tier cities has increased significantly, with high-end properties taking an average of 412 days to sell, compared to 89 days in 2021 [7] Mortgage and Financial Implications - Despite falling property prices, mortgage payments remain unchanged, leading to increased financial pressure on homeowners [8] - As of May 2025, the total mortgage debt in China reached 38.7 trillion yuan, with a non-performing loan rate of 2.1%, the highest in a decade [5] - The real estate sector accounts for approximately 25% of GDP, and related industries such as home appliances and building materials have seen significant sales declines, with home appliance sales down 18.7% and building materials down 22.3% in the second quarter of 2025 [8] Government and Policy Responses - In response to the market downturn, 27 cities have introduced home purchase subsidy policies, offering up to 5% of the purchase price [9] - Some developers are exploring "rent-to-own" schemes, allowing potential buyers to rent before purchasing, with rental payments contributing to the purchase price [9] - Banks are beginning to trial "mortgage replacement" programs, allowing for reassessment of loan amounts in light of falling property values, although this is still in the early stages [9] Long-term Market Outlook - The Chinese real estate market is shifting from a focus on new construction to optimizing existing properties, with an emphasis on housing for living rather than investment [11] - Buyers are encouraged to adjust their expectations regarding property appreciation and focus on the residential function of homes [11]

Group 1: Economic Conditions and Responses - The Eurozone faced a liquidity trap with inflation dropping to 0.55% and the ECB lowering the deposit facility rate to negative values, reaching -0.4% by March 2016[4] - Japan experienced a prolonged liquidity trap from 1990 to 2023, with the Bank of Japan reducing the benchmark interest rate from 6% to 0.5% between 1991 and 1995, and later implementing a zero interest rate policy[6] - The U.S. responded swiftly to the liquidity trap during the 2008 financial crisis, cutting the federal funds rate from 5.25% to 0.25% and launching multiple rounds of quantitative easing, totaling $1.75 trillion in asset purchases[12] Group 2: Economic Performance Indicators - Eurozone GDP contracted by 4.46% in 2009, with unemployment rising from 7.68% to 9.68% during the same period[47] - Japan's GDP saw a significant decline of 6.23% in 2009 due to the global financial crisis, with unemployment peaking at 5.38% in 2002[80] - The Eurozone's GDP growth rebounded to 6.33% in 2021 after a sharp contraction of 6.01% in 2020 due to the pandemic[51] Group 3: Policy Implications and Lessons - The experiences of the Eurozone, Japan, and the U.S. highlight the importance of timely and decisive monetary policy in addressing liquidity traps, with the U.S. approach being the most effective[13] - The Eurozone's reliance on monetary policy without sufficient fiscal coordination led to prolonged economic stagnation, emphasizing the need for structural reforms alongside monetary easing[78] - Japan's prolonged low growth and inflation despite aggressive monetary policies illustrate the diminishing returns of such measures over time, necessitating a shift towards policy normalization[11]

1. Report Industry Investment Rating No relevant content provided. 2. Core View of the Report The report analyzes the policy responses of the EU, Japan, and the US to liquidity traps and provides insights for China's future policy directions. It emphasizes that China should adopt a "fast, accurate, and forceful" monetary policy rhythm, more active fiscal policies, and structural reforms to avoid falling into a liquidity trap and stimulate economic growth [9][11][98]. 3. Summary by Relevant Catalogs 3.1 When an economy falls into a "liquidity trap", what characteristics will it exhibit? - **Core characteristics of a liquidity trap**: - **Near-zero nominal interest rates**: When policy rates are at or near 0%, borrowing and investment motives are weak, and market rates cannot be further reduced [18]. - **Deflation**: Increased preference for cash leads to reduced consumption, forcing businesses to lower prices and causing deflation [19]. - **Abundant market liquidity but low investment willingness**: Deflation expectations lead economic agents to postpone consumption and investment, resulting in low investment returns and weak investment willingness [22]. - **Ineffective monetary policy transmission**: Nominal interest rates have reached the zero lower bound, and banks are reluctant to lend, preventing liquidity from flowing into the real economy [23]. - **Transmission mechanism analysis**: Negative events prompt central banks to implement expansionary monetary policies. However, in a liquidity trap, low interest rates lead the public to hoard cash, reducing consumption and investment, and causing the economy to fall into a policy - failure situation [24][25]. 3.2 Overseas economies have successively fallen into liquidity traps 3.2.1 EU: Timely but conventional and indecisive policy responses (2008 - 2016) - **Policy changes and economic performance**: In response to the 2008 financial crisis, the ECB cut interest rates, launched bond - buying programs, and implemented LTRO and OMT. In 2015, it started the APP. GDP growth recovered in 2015 but slowed later. Unemployment declined, but inflation remained low. After the COVID - 19 pandemic, the ECB launched the PEPP, and the economy rebounded, but inflation concerns emerged [2][31][33]. - **Core characteristics of the EU's liquidity trap**: Policy rates were near zero or negative and stable until 2022. GDP growth was slow, CPI fluctuated, retail sales were weak, and unemployment was high, indicating deflation. Investment was pessimistic initially but recovered after 2015 [37][40][43]. 3.2.2 Japan: "The Lost Thirty Years" (1990 - 2023) - **Policy changes and economic performance**: After the asset bubble burst in the 1990s, the Bank of Japan cut interest rates, implemented QE, and later adopted "Abenomics". The economy showed short - term improvement, but low inflation and growth persisted. In 2023, Japan began to normalize policies and showed signs of recovery [3][5][52]. - **Core characteristics of Japan's liquidity trap**: Policy target rates were near zero or negative. GDP growth was low, CPI showed deflation, retail sales were weak, and unemployment was high. Investment was low, and funds were deposited in banks, indicating ineffective monetary policy transmission [56][60][64]. 3.2.3 US: A classic and correct self - rescue case (2008 - 2013) - **Policy changes and economic performance**: In response to the 2007 subprime mortgage crisis, the Fed quickly cut interest rates, launched QE1, QE2, and QE3, and implemented the "Operation Twist". The economy recovered, and the Fed ended QE in 2014 and normalized policies in 2015 [7][68][69]. - **Core characteristics of the US's liquidity trap**: Federal funds rates were near zero after 2008. GDP growth was low, inflation was weak, retail sales were volatile, and unemployment was high. Investment declined sharply during the crisis and showed short - term recovery but remained structurally weak [72][76][80]. 3.3 China's liquidity risk assessment and analysis - **Current policy environment**: China faces challenges in traditional manufacturing investment, financial institution risk preferences, and high household savings rates. Traditional monetary policy tools have diminishing marginal utility, requiring more precise policy combinations [86]. - **Risk factor identification and assessment**: China's policy rates still have room for operation. GDP growth has declined and been volatile, and the real estate sector has a negative impact. Consumption willingness is weak, and the M2 - M1 gap indicates low money activation [91][92][95]. - **Policy recommendations**: China should adopt a "fast, accurate, and forceful" monetary policy, more active fiscal policies, and structural reforms to stimulate consumption and investment and avoid a liquidity trap [9][11][98].

Summary of Conference Call Notes Industry or Company Involved - The discussion primarily revolves around the macroeconomic environment, focusing on the impact of government policies, investment trends, and the behavior of central banks, particularly in relation to gold purchases and U.S. debt. Core Points and Arguments 1. **Economic Volatility and Domestic Policies** The current strategy maintains a view that a new round of volatility has begun due to rising overseas risks, influenced by domestic policies such as the "two new" policy aimed at economic stimulation through equipment upgrades and replacements [1] 2. **Investment Trends and Economic Indicators** There is a noted slowdown in investment growth, particularly in sectors like automotive, where April's year-on-year growth was 7%, reflecting a significant drop from March's 4.8% [2] 3. **Government as Economic Engine** The government is expected to play a crucial role in driving economic recovery through expanded development scales and increased fiscal support, particularly for social security and flexible employment [3] 4. **Debt Maturity and Market Impact** A total of approximately 60 trillion in debt is maturing, with about 20 trillion expected to mature between May and July, which constitutes nearly one-third of the total market capitalization [4] 5. **Interest Rate Projections** Anticipations are that the 10-year domestic interest rate may exceed 2.5% in June due to inflation and debt rollover pressures [5] 6. **Tax Cuts and Corporate Investment** Tax cuts are expected to reduce corporate costs but may not lead to increased production or investment due to weak demand, resulting in a diminished effect on economic growth [6] 7. **U.S. Economic Growth Concerns** There are doubts about whether U.S. economic growth can exceed 4%, with potential risks of a debt crisis if growth does not keep pace with interest obligations [7] 8. **Trade and Tariff Negotiations** Recent tariff negotiations have created market volatility, with the U.S. imposing tariffs that have led to significant market reactions, indicating the fragility of trade relations [8] 9. **China's Trade Dynamics** China's response to U.S. demands for increased imports while restricting technology exports complicates trade relations, making it difficult to balance trade deficits [9] 10. **Central Bank Gold Purchases** Central banks are increasingly purchasing gold as a hedge against U.S. debt and to diversify reserves, with the share of central bank gold purchases in total gold demand rising from 10% to 23.2% since 2022 [13][14] 11. **Global Gold Reserve Trends** Countries like Russia, China, India, Turkey, and Poland are significantly increasing their gold reserves, reflecting a strategic shift in asset allocation [15] 12. **Drivers of Central Bank Gold Purchases** The primary drivers for increased gold purchases by central banks include high U.S. debt levels and rising risks associated with globalization and trade negotiations [17] 13. **Long-term Trends in Gold Reserves** The trend indicates a significant potential for increasing gold reserves among central banks, especially as the share of dollar-denominated assets declines [18][19] 14. **Future of Central Bank Gold Purchases** The ongoing issues with U.S. debt and credit quality, along with geopolitical uncertainties, suggest that the trend of central banks purchasing gold will continue to rise [20] Other Important but Possibly Overlooked Content - The potential for liquidity traps in the U.S. economy, particularly if unemployment rises and inflation remains high, could lead to further economic challenges [11][12] - The discussion highlights the interconnectedness of global markets and the potential for cascading effects from U.S. economic policies on other economies, particularly in emerging markets [11]

Group 1: Economic Theory and Models - The Ricardian equivalence theory is increasingly evident in China, where rising government deficit rates reduce residents' marginal propensity to consume[1] - The RBC model is utilized to simulate the impact of fiscal spending on household consumption and consumption propensity[1] - Labor supply elasticity is identified as a key factor influencing changes in household consumption propensity, with values of -0.12 and 0.8 showing that higher elasticity leads to lower consumption propensity and fiscal multipliers[1] Group 2: Fiscal Spending and Consumption Relationship - Fiscal spending has a crowding-out effect on household consumption, with an average APC of 41% since the reform and a tax rate (τ) of 19.76%, indicating that a 1% increase in τ results in a 1.53% decrease in consumption[1] - In scenarios where private consumption propensity declines, increased fiscal spending is recommended to stabilize consumption levels[1] - The relationship between fiscal spending (τ) and APC indicates that if APC decreases, fiscal spending must increase to maintain consumption levels[1] Group 3: Implications of Government Debt - Concerns over high government debt can lead to reduced consumption as residents anticipate future tax increases to balance fiscal requirements[1] - The sustainability of fiscal policy is crucial; unsustainable debt levels can lead to reduced consumer spending and economic growth potential[1] - Investment growth can suppress overall consumption levels, highlighting the balance needed between investment and consumption[1] Group 4: Simulation Results - The RBC model simulations show that increased government purchases lead to higher output but also result in decreased household consumption due to increased taxation[1] - Higher labor supply elasticity results in a faster decline in household consumption propensity following fiscal shocks, indicating a smaller fiscal multiplier[1]

Group 1 - The core argument of the article is that managing inflation involves "tightening" monetary policy, while managing deflation requires a more nuanced approach, as simply "loosening" can lead to a liquidity trap [1][2][9] - Inflation is characterized by an excess of money in the market, necessitating a reduction in liquidity to stabilize prices [1][2] - Deflation, on the other hand, is not merely a decrease in prices but a complex psychological issue that can lead to a self-reinforcing cycle of reduced spending and investment [9][10][11] Group 2 - Fiscal policy is essential in a deflationary environment, as both businesses and consumers are reluctant to borrow and spend [3][4] - There are two types of fiscal policies: direct government spending and providing funds to citizens for consumption [4][5] - The effectiveness of government spending is contingent on the multiplier effect, where initial government expenditure leads to further spending by businesses and consumers [5][6] Group 3 - Direct cash transfers to citizens can stimulate consumption more effectively than government spending, as individuals are more aware of their needs [7][9] - However, direct cash transfers face challenges related to marginal propensity to consume, as seen in Japan's prolonged economic stagnation [7][12] - The article highlights the importance of targeted consumption vouchers and subsidies to encourage spending in specific sectors [7][12] Group 4 - The article discusses historical examples of deflation, including the U.S. Gilded Age, Switzerland post-Eurozone crisis, and Greece during the Eurozone crisis, illustrating different causes and solutions to deflation [12][16][19] - The U.S. Gilded Age experienced deflation due to a combination of gold standard constraints and increased productivity, leading to economic growth despite falling prices [12][13] - Switzerland managed to escape deflation through negative interest rates, while Greece's structural reforms were necessary to recover from severe deflation [16][19]

Report Summary 1. Report Industry Investment Rating No relevant content provided. 2. Core View of the Report - The central bank has been actively guiding the market's reasonable expectations through various measures to prevent the strengthening of unilateral consensus expectations in the bond market [1]. - Timely guidance by the central bank is crucial to prevent systemic risks, address domestic interest - rate constraints, and drive funds to flow from the bond market to the stock market [3]. - Preventing strong unilateral consensus expectations can control the rapid decline of interest rates, maintain the steepness of the interest - rate curve, and promote economic recovery [4]. 3. Summary by Related Content Central Bank's Measures to Guide Expectations - Last year, the central bank issued documents, conducted window - guidance on rural commercial banks, and prohibited some market participants from buying long - term bonds. It also约谈ed aggressive financial institutions and issued heavy fines for bond - market violations [1]. - In early January this year, the central bank influenced the market through marginal changes in liquidity operations, and the Financial Times warned against over - interpreting monetary easing. In the first quarter, the central bank maintained a tight balance of funds, leading to a rise in short - term bond yields and then long - term yields, breaking the consensus expectation formed since last quarter [2]. - In June this year, the central bank did not publish the monthly treasury bond trading data on June 30 and removed the wording of "choosing the opportunity to cut reserve requirements and interest rates" in the second - quarter regular meeting of the Monetary Policy Committee, effectively interfering with the consensus expectation of breaking through the previous low [6]. Significance of Central Bank's Guidance - To prevent the rapid decline of interest rates from triggering systemic risks, such as the liquidity trap in Japan in the 1990s. For example, the rapid decline of the 10 - year treasury bond rate from around 2.1% to 1.6% last quarter needed timely correction [3]. - There are many constraints in the downward path of domestic interest rates, including pressure on bank net interest margins and liability sides, and the need to maintain the stability of the RMB exchange rate to avoid excessive capital outflows [3]. - The central bank may aim to drive funds from the bond market to the stock market, especially under the strategy of developing new - quality productive forces, to support the financing of technology companies [3]. Current Bond Market Situation - Since early May this year, the 10 - year treasury bond has been fluctuating around 1.65% - 1.70%. Without a new comprehensive interest - rate cut, the bond market has not reached a new low. The market has been speculating about restarting treasury bond trading and opening an interest - rate cut window in July [5][6].

Core Viewpoint - The Federal Reserve is expected to maintain the federal funds target rate range at 4.25%-4.50% during the June 2025 meeting, aligning with market expectations, while concerns over "stagflation" risks remain high, making the threshold for restarting the rate cut cycle quite elevated [1][3][4]. Group 1: Economic Predictions and Monetary Policy - The Federal Reserve's latest economic forecasts indicate a downward revision in growth predictions and an upward adjustment in inflation and unemployment rate forecasts, reflecting a more hawkish stance [3][4]. - The Fed has lowered the GDP growth forecast for 2025 and 2026 by 0.3 percentage points and 0.2 percentage points, respectively, while raising the core PCE inflation forecast for the same years by 0.3 percentage points and 0.2 percentage points [3]. - The unemployment rate forecast for 2025, 2026, and 2027 has been increased by 0.1 percentage points, indicating a more cautious outlook on the labor market [3]. Group 2: Investment Recommendations - Gold is expected to continue reaching historical highs due to factors such as potential U.S. "hard landing," dollar depreciation, and renewed Fed rate cuts, which are favorable for gold prices [2]. - The pharmaceutical sector, particularly innovative drugs, is anticipated to see upward opportunities in both A-shares and Hong Kong stocks during the Fed's rate cut cycle, driven by policy guidance and improving profit margins [2]. - The U.S. stock market faces significant adjustment risks due to "stagflation," which may pressure both earnings and valuations, necessitating a reassessment of valuation levels [2]. Group 3: Tariff Impacts and Inflation Concerns - The impact of tariffs is expected to become more pronounced in the summer, with the Fed acknowledging that high tariffs are likely to increase inflation and exert pressure on economic activity [4]. - The Fed's monetary policy guidance suggests that rate cuts may not come quickly unless there is a significant deterioration in the labor market or increased economic downward pressure [4]. - The potential for a "liquidity trap" scenario is highlighted, where rising tariffs could exacerbate "stagflation" risks, leading to a possible second round of rate hikes [5].

Core Insights - The Federal Reserve has maintained the federal funds target rate range at 4.25%-4.50%, marking the fourth consecutive "pause" since the beginning of the current rate cut cycle in September 2024 [2] - Economic forecasts indicate a heightened concern over "stagflation," with the Fed lowering growth projections while raising inflation and unemployment rate forecasts [2][3] - The Fed's dot plot suggests two rate cuts in 2025, but the number of committee members who believe no cuts are needed has increased from four to seven since March, indicating a hawkish stance [2][3] Economic Forecasts - The Fed has revised down the GDP growth forecast for 2025 and 2026 to 1.4% and 1.6%, respectively, while raising core PCE inflation forecasts to 3.1%, 2.4%, and 2.1% for 2025, 2026, and 2027 [2] - Unemployment rate forecasts have been adjusted upward to 4.5% for 2025 and 2026, and 4.4% for 2027 [2] Tariff Impact - The impact of tariffs is expected to become more pronounced in the summer, with Powell indicating that high tariffs are likely to push inflation up and exert pressure on economic activity [3] - The transmission of tariffs to final consumers is anticipated to take time, with many companies expected to pass on the costs to consumers [3] Monetary Policy Guidance - Powell stated that rate cuts could come quickly or may take time, depending on the labor market and economic pressures [3] - The current Fed stance is described as "passive and reactive," with potential for rate hikes if stagflation risks intensify [3] Investment Recommendations - Gold is expected to perform well amid a potential "hard landing" in the U.S. economy, driven by factors such as dollar depreciation and renewed Fed rate cuts [4] - The pharmaceutical sector, particularly innovative drugs, is seen as having upside potential during the Fed's rate cut cycle, with expectations of improved margins and revenue [4] - U.S. equities face significant adjustment risks due to stagflation concerns, with both earnings and valuation pressures anticipated [4] - U.S. Treasuries may present a trend-following opportunity only after inflation declines, with potential for rapid interest rate increases beforehand [4]