Economic Growth Overview - China's GDP growth for the first three quarters of 2023 is 5.2% year-on-year, with quarterly growth rates of 5.4% in Q1, 5.2% in Q2, and a slowdown to 4.8% in Q3 [1][4] - The economic performance aligns with expectations, influenced by external environmental challenges and the timing of policy implementations [4] Foreign Trade Performance - Despite concerns over foreign trade pressures due to the trade war starting in April, actual data shows a continuation of quarterly growth, with a notable 8.0% increase in September [4][5] - The total import and export volume for goods increased by 1.3% year-on-year, with Q1 growth at 4.5% and Q2 at 6% [5] Export Competitiveness - China's export competitiveness has shown remarkable resilience, particularly in non-U.S. markets, driven by innovation and large-scale production capabilities [7] - The country has effectively countered rising global trade protectionism by promoting trade liberalization, leading to significant expansion in new trade markets [7] Policy Directions for Q4 - The focus for Q4 policy will include maximizing the effectiveness of existing policy tools, targeting key areas of economic weakness, and enhancing market liquidity through monetary policy [7]

Economic Growth Outlook - The actual GDP growth in Q3 was 4.8% year-on-year, with a probability of achieving the 5% annual growth target still intact[2] - To meet the 5% target, Q4 GDP needs to reach a seasonally adjusted quarter-on-quarter growth of approximately 1.11%[10] - The industrial added value in September increased by 6.5% year-on-year, while fixed asset investment decreased by 6.8%[7] Demand and Supply Dynamics - Production has outperformed demand, with exports, consumption, and investment showing varying degrees of decline[2] - The nominal GDP growth rate for Q3 was 3.7%, with the GDP deflator index improving slightly to -1.02%[10] - The industrial capacity utilization rate rose to 74.6%, indicating a more balanced production and sales environment[10] Short-term Challenges - October's growth faces challenges due to high base effects from the previous year, with significant declines in both investment and consumption expected[10] - Fixed asset investment has turned negative at -0.5% year-to-date, marking the weakest performance since August 2020[10] - Retail sales growth in September dropped to 3%, with declines in durable goods sales and restaurant revenues[10] Policy Recommendations - There is a necessity for counter-cyclical policies to stabilize the economy, especially if demand continues to decline[10] - The government has preemptively allocated 500 billion yuan for local bond issuance, reflecting a commitment to macroeconomic support[2] - Monitoring the marginal changes in monetary and demand-side policies will be crucial as demand trends evolve[2]

Group 1 - The report highlights that the fourth quarter is historically a high-frequency window for fiscal policy to intensify, especially under weak domestic demand conditions, where the pressure to meet annual economic targets often manifests at year-end [2][8][10] - In the baseline scenario, the GDP growth rate for the third quarter is estimated to be around 4.9%, leading to a cumulative growth rate of approximately 5.2% for the first three quarters, which exceeds the annual target of around 5% [10][11] - The report suggests that even if the economy continues to show moderate decline in the fourth quarter, as long as it does not significantly deviate from the central level, the economic growth rate is expected to remain stable within a reasonable range [11][12] Group 2 - The establishment of 500 billion new policy financial tools at the end of the third quarter provides a time window for concentrated project commencement in the fourth quarter, which can leverage local matching investments and potentially generate a multiplier effect of around one trillion [3][11] - The report indicates that the reliance on large-scale additional stimulus is decreasing, suggesting that the pressure to achieve annual targets is relatively low, and the focus of policies may shift towards consolidating the economic fundamentals rather than introducing large-scale incremental stimulus measures [11][18] - Short-term market dynamics are expected to be driven more by risk appetite and market microstructure, with the report noting that negative sentiments have been largely priced in, making emotional recovery a key logic for recent market trends [4][14][18]

Group 1 - The report highlights that the fourth quarter is traditionally a high-frequency window for fiscal policy to intensify, especially under weak domestic demand conditions, where the pressure to meet annual economic targets becomes more pronounced [2][8][10] - The cumulative GDP growth for the first three quarters is projected to exceed the annual target, suggesting that the pressure to implement large-scale counter-cyclical policies in the fourth quarter is lower than in previous years [10][11] - The report indicates that even if the economic growth continues to moderate in the fourth quarter, as long as it does not deviate significantly from the central level, the growth rate is expected to remain stable within a reasonable range [11][18] Group 2 - The establishment of 500 billion new policy financial tools at the end of the third quarter is noted as a significant measure to support project initiation in the fourth quarter, which could leverage local matching investments and potentially create a multiplier effect of around one trillion [3][11] - The report suggests that the reliance on large-scale additional stimulus is decreasing, indicating that the fiscal policy's focus may shift towards consolidating the economic fundamentals rather than introducing substantial new measures [11][18] - The report emphasizes that the short-term market dynamics are likely to be driven more by risk appetite and market microstructure rather than significant policy changes, with a notable recovery in market sentiment observed [4][14][18] Group 3 - The report discusses the potential for emotional recovery and risk preference resonance in the market, suggesting that the current low sentiment levels may lead to a phase of recovery, although this is subject to external shocks or internal sentiment weakening [4][14] - It is noted that the market's microstructure is currently similar to that of April, with sentiment indicators at a two-year low, reflecting a comprehensive pricing of negative factors [14][18] - The report concludes that while there is some room for fiscal policy intervention, the urgency is not as pronounced as in previous years, and the market's mid-term expectations have shifted significantly compared to earlier in the year [18]

Core Viewpoint - The sell-side research institutions generally believe that the market volatility caused by the equal tariffs in April will not "repeat yesterday," thus there is no need to be overly pessimistic about equity assets [1] Group 1: Market Outlook - Galaxy Securities report indicates that A-shares may experience slight fluctuations, but the upward trend remains unchanged, accompanied by a shift in market style [1] - The increase in short-term uncertainty will lower the market's risk appetite for Chinese assets, prompting investors to reassess whether market pricing is reasonable due to significant previous profits [1] Group 2: Investment Opportunities - Despite the short-term disturbances from the tariff conflict, the long-term bullish characteristics of A-shares are expected to continue [1] - The probability of a Trump TACO is high, and the resilience of China's supply chain will limit the actual impact on the economic fundamentals [1] - China's counter-cyclical policies still have considerable room for maneuver, with incremental reserve policies set to be introduced in response to changing conditions [1] - Since the second quarter, China's version of a "stabilization fund" has played a positive role in stabilizing the market, and if stock market volatility increases significantly, the stabilization mechanism will again be crucial [1]

Group 1 - The central bank is expected to implement a 10-20 basis points interest rate cut in the fourth quarter [1] - A potential interest rate cut may deepen the inversion of the China-US interest rate differential, leading to capital outflows and depreciation pressure on the RMB [1] - Despite previous expectations, the interest rate differential has narrowed this year, and the RMB has appreciated following the central bank's easing measures [1] Group 2 - Even with a potential interest rate cut in the fourth quarter, the RMB is expected to maintain an appreciation trend for the year [1] - Under the baseline scenario, the USD/CNY exchange rate is projected to approach 7.0 by year-end [1] - In an optimistic scenario, where extraordinary counter-cyclical policies stimulate the economy or tariffs on Chinese imports are reduced by an additional 20%, the new equilibrium for the USD/CNY exchange rate is estimated to be around 6.7 [1]

Group 1: Federal Reserve and Economic Outlook - The Federal Reserve officials show significant divergence regarding future interest rate cuts, adding uncertainty to the outlook[2] - Powell indicates that any rate cuts will likely be slow and moderate unless there is a clear economic downturn[2] - U.S. Q2 GDP annualized growth was revised up to 3.8%, with personal consumption expenditure increasing by 2.5%[4] Group 2: Domestic Economic Indicators - PPI shows a narrowing year-on-year decline, indicating the effectiveness of anti-involution measures[2] - As of September 26, the average retail sales of passenger cars in September reached 1.191 million units, a year-on-year increase of 0.3%[2] - The Baltic Dry Index (BDI) averaged 2118.6, a month-on-month increase of 5.9% and a year-on-year increase of 7.7%[2] Group 3: Commodity Prices and Production - WTI crude oil rose by 1.02% and Brent crude by 1.5% as of September 26, driven by supply concerns[1] - The average operating rate of blast furnaces increased by 0.47 percentage points to 84.47% as of September 28[2] - Cement dispatch rates recorded a month-on-month increase of 0.59 percentage points, up 4.66% year-on-year[3] Group 4: Inflation and Consumer Behavior - CPI shows a decline in pork prices by 0.94% week-on-week, while fruit and vegetable prices have generally rebounded[2] - The average wholesale price of 28 monitored vegetables increased by 1.16%, and the average price of 6 monitored fruits rose by 2.02%[2] - The personal savings rate in the U.S. was reported at 4.6%, indicating stable consumer spending and income growth[4]

Group 1: Federal Reserve and Economic Outlook - The Federal Reserve officials show significant divergence regarding future interest rate cuts, adding uncertainty to the outlook[2] - Powell indicates that any rate cuts will likely be slow and moderate unless there is a clear economic downturn[2] - U.S. economic data remains resilient, with PPI's year-on-year decline narrowing and industrial profits turning positive, suggesting the effectiveness of anti-involution measures[2] Group 2: Domestic Economic Indicators - As of September 26, 2023, passenger car sales reached 1.191 million units, a year-on-year increase of 0.3% and a month-on-month increase of 5.9%[2] - The Baltic Dry Index (BDI) averaged 2118.6, up 5.9% month-on-month and 7.7% year-on-year, indicating strong export resilience[2] - Industrial production shows a month-on-month increase, with average blast furnace operating rates rising by 0.47 percentage points to 84.47%[2] Group 3: Price Trends and Inflation - As of September 26, 2023, pork prices fell by 0.94% week-on-week, while the average wholesale price of 28 monitored vegetables rose by 1.16%[2] - The Consumer Price Index (CPI) shows a slight increase in food prices, with energy prices rising by 0.8% and food prices by 0.5%[4] - Core PCE price index increased by 0.2% month-on-month and 2.9% year-on-year, indicating stable inflation levels[4] Group 4: Fiscal and Monetary Policy - This week, ordinary government bonds issued totaled 247.5 billion, with an issuance progress of 79%[3] - The central bank's net MLF injection was 300 billion, signaling a monetary easing policy[3] - The yield curve for government bonds steepened, with the 30-year yield at 2.217% and the 10-year yield at 1.8768%[3]

Exchange Rate Projections - Under the baseline scenario, the USD/CNY exchange rate is expected to approach 7.0 by the end of the year[1] - In an optimistic scenario, with extraordinary counter-cyclical policies, the new equilibrium for USD/CNY could be around 6.7[1] Monetary Policy Implications - A potential interest rate cut of 10-20 basis points (BP) by the People's Bank of China (PBOC) in Q4 may not delay RMB appreciation but could intensify it[1] - The current market does not fully anticipate a rate cut, meaning the existing exchange rate does not factor in this possibility[1] Economic Context - The recent RMB appreciation is not driven by strong economic fundamentals but rather by expectations and a self-fulfilling cycle of currency appreciation[1][10] - The Chinese government's debt cost is currently lower than economic growth rates, supporting fiscal expansion and the exchange rate[1] Investment Insights - RMB appreciation is expected to benefit Chinese stocks, with historical data showing that a 1% appreciation typically leads to a 2.73% increase in A-shares and a 4.52% increase in Hong Kong stocks[6] - The current RMB appreciation cycle has seen A-shares rise by an average of 8.31% and Hong Kong stocks by 10.52% since April 8, 2025[6] Risks and Considerations - Risks include misinterpretation of policy, unexpected monetary policy actions, and potential increases in U.S. tariffs[50]

Group 1: Economic Transformation Insights - China's current transformation strategy is more aligned with the U.S. in the 1970s, focusing on "going global" and "common prosperity" akin to the U.S. deindustrialization and Great Society initiatives[1] - The Chinese economy is entering the latter stage of transformation, with cyclical issues becoming less impactful, as evidenced by the decline in old economic drivers like real estate[1] - The transition phase requires patience in policy implementation, as excessive use of counter-cyclical policies may lead to structural issues similar to the U.S. in the 1960s and 70s[1] Group 2: Market and Policy Implications - The easing of cyclical pressures, particularly in real estate, suggests a potential formation of an "L-shaped" economic recovery, supported by counter-cyclical policies[1] - The ongoing structural reforms and technological breakthroughs, although slow, create opportunities for risk appetite and asset revaluation in the capital markets[1] - The A-share bull market since the "924" policy in 2021 reflects the synergy between counter-cyclical policies and technological advancements in sectors like AI and robotics[1] Group 3: Risks and Challenges - Risks include the possibility that the pace of structural reforms may not meet expectations, and uncertainties surrounding technological breakthroughs and external economic influences[1] - The decline in housing prices, with first-tier city prices dropping by 34.3% from their peak as of August 2025, highlights the ongoing challenges in the real estate sector[3] - The GDP deflator index has shown negative growth for nine consecutive quarters since Q2 2023, indicating persistent economic weakness[3]