Group 1: Monetary Market Overview - The central bank conducted a net liquidity withdrawal of 1.3634 trillion yuan this week, with an 800 billion yuan 3M reverse repo operation on Friday, which was a reduction of 200 billion yuan compared to the same maturity's maturity [1][15] - Despite the large liquidity withdrawal, the demand for funds at the beginning of the month was relatively limited, and the net payment of government bonds was low, maintaining a loose liquidity environment [1][15] - The DR001 rate fell below 1.3% mid-week but rose to 1.32% by Friday, indicating a slight tightening of liquidity conditions [1][15] Group 2: Repo Market Activity - The volume of pledged repos surged significantly after the month-end, reaching a historical high of 9.18 trillion yuan on Thursday, with an average daily volume increase of 1.93 trillion yuan to 8.64 trillion yuan for the week [2][23] - Large banks' net financing approached 6 trillion yuan on Thursday, with a slight decline on Friday, while the overall net financing from banks increased significantly [2][23] - Non-bank rigid financing saw a substantial drop in the first half of the week but stabilized afterward, with significant declines in money market funds and other products [2][23] Group 3: Government Bond Issuance and Financing - The net payment of government bonds this week was 282 billion yuan, with expectations for next week’s issuance to be around 4.32 trillion yuan [4][39] - The issuance of local government bonds in seven regions is expected to total 135.5 billion yuan, with various types of bonds being issued [4][39] - The average issuance term for local bonds decreased from 17.2 years in February to 15.4 years in the second week of March [4][39] Group 4: Interest Rate and Yield Trends - The central bank indicated that a 10-year government bond yield stabilizing around 1.8% is reasonable, and the buying scale of government bonds decreased to 50 billion yuan in February [4][36] - The central bank's operations are expected to create space for interest rate cuts, with the possibility of further easing measures being discussed [4][35] - The overall bond yield curve showed a downward trend, with short-term credit spreads widening and mid-to-long-term spreads narrowing [9]

Economic Performance - Japan's economic sentiment improved in February, with the manufacturing PMI rising by 1.5 percentage points to 53.0 and the services PMI increasing by 0.1 percentage points to 53.8[3] - The actual GDP growth for Q4 2025 was 0.2% on a quarter-on-quarter annualized basis, below Bloomberg's consensus expectation of 1.6%[3] - January retail sales increased by 4.1% month-on-month, significantly exceeding the market expectation of 1.5%, driven mainly by a 12.5% surge in automobile sales[3] Inflation and Prices - Japan's CPI in January dropped to 1.5%, marking the first time in four years it fell below the Bank of Japan's 2% inflation target[4] - The core CPI (excluding fresh food and energy) rose to 2.5% in February, up from 2.4% in January, indicating persistent inflationary pressures in certain sectors[4] Export and Industrial Production - Japan's exports saw a significant year-on-year increase of 16.0% in January, while imports grew by only 2.3%[4] - The industrial production index rose by 2.7% month-on-month in January, with most sectors showing strength in production[4] Labor Market - The unemployment rate remained stable at 2.6% as of December 2025, with nominal wage growth increasing to 2.4%[3] - The number of formal employees remained unchanged, while the number of informal employees slightly decreased, indicating a stable labor market[3] Asset Prices - Following the ruling party's electoral victory, the TOPIX and Nikkei 225 indices both surged by 10.4% in February[6] - The Japanese yen depreciated to 155.9 against the US dollar, reflecting expectations of continued monetary easing[6] Policy Outlook - The ruling Liberal Democratic Party secured a two-thirds majority in the House of Representatives, paving the way for more expansive fiscal and monetary policies[5] - The Bank of Japan is expected to adopt a more cautious approach to interest rate hikes, with market expectations for a 46 basis point increase in 2026[6]

Global Asset Price Performance - Long-term interest rates are generally rising, with major global stock markets experiencing declines; the S&P 500, Dow Jones, and Nasdaq indices fell by 2%, 3%, and 1.2% respectively [2] - In the bond market, yields in major overseas markets are mostly up, with the 10-year U.S. Treasury yield rising by 18 basis points compared to last week [2] - Commodity prices are affected by the ongoing U.S.-Iran conflict, with WTI and Brent crude oil prices increasing significantly by 24.2% and 20.6% respectively; meanwhile, gold and copper prices fell by 2% and 4.7% [2] - The U.S. dollar index rose by 1.3%, while the offshore RMB depreciated by 0.3% against the U.S. dollar [2] Major Central Bank Monetary Policies - Kevin Warsh has been officially nominated by President Trump to replace Jerome Powell as the next Federal Reserve Chair, seen as a "dovish" candidate, which may lead to more accommodative monetary policy if confirmed [4] - Market expectations for a rate cut by the Federal Reserve in June have decreased to 32.6%, down from 57.3% a week prior [4] - The European Central Bank (ECB) reiterated its commitment to a 2% inflation target and a data-dependent approach to monetary policy [4] - The Bank of Japan is reportedly continuing its rate normalization efforts, with low expectations for a rate hike in March but some possibility for April [4] U.S. Economic Dynamics - The ISM services index for February surged to 56.1%, the highest since mid-2022, with new orders rising to 58.6% [9] - Non-farm payrolls showed a decline of 92,000 jobs in February, significantly below the expected increase of 55,000, marking the largest drop since November 2025 [9] - The private sector also saw a decline in job creation, with an average of 41,000 new jobs over the past three months, well below the previous average of 94,000 [9] Other Regional Economic Dynamics - Eurozone inflation risks are increasing, with February inflation rising by 1.9% year-on-year and 0.7% month-on-month, driven by a 3.4% increase in service sector inflation [21] - The ongoing conflict in Iran has led to an 85% weekly increase in natural gas prices, exacerbating energy crisis concerns [21] - South Korea's stock market experienced a significant drop of 12.11% on March 4, the largest single-day decline since the 9/11 attacks, due to concerns over energy dependence and inflation [21] - Japan's Nikkei 225 index also faced substantial pressure, dropping over 3,000 points in a week, as rising oil prices threaten to increase domestic inflation [21]

Core Viewpoint - The unexpected shrinkage in non-farm payrolls in February raises concerns about the labor market and its implications for monetary policy, particularly in light of the ongoing geopolitical tensions affecting economic forecasts [1]. Labor Market Analysis - The six-month moving average of job creation suggests that the current job market dynamics may not be accurately reflected in recent reports, indicating potential miscalibration in monetary policy [3]. - There is a belief that the labor market requires more support from monetary policy, as the current issues may stem from labor demand rather than supply constraints, such as immigration [4][5]. Monetary Policy Implications - The tight monetary policy is perceived to be hindering labor demand, with businesses not hiring sufficiently, which could indicate a need for a more accommodative monetary stance [6]. - The impact of rising oil prices, currently at $91 per barrel, is acknowledged, but it is suggested that the Federal Reserve typically does not react strongly to such price shocks, as they are often one-off events [7][8]. Inflation Considerations - Core inflation is viewed as a more reliable indicator for medium-term inflation trends compared to headline inflation, which can be skewed by temporary shocks like oil price increases [8]. - The current inflationary pressures are thought to be influenced by increased spending on energy products, which could further bias the Federal Reserve towards a dovish policy stance [9]. Technological Displacement - There are indications of job displacement due to technological advancements, particularly affecting entry-level positions, which may require policy intervention to support those entering the job market [10][11]. - The central bank is seen as capable of accommodating the sectoral reallocation of jobs caused by technological changes, although the nature of new jobs created remains uncertain [12][13].

Core Viewpoint - The weak February jobs report, showing a drop of 92,000 in nonfarm payrolls, supports the rationale for the Federal Reserve to lower interest rates further, focusing on labor market support rather than inflation concerns [1]. Group 1: Interest Rate Policy - Federal Reserve Governor Stephen Miran advocates for a more accommodative monetary policy to support the labor market, suggesting that the current interest rate range of 3.5% to 3.75% is not appropriate [2]. - Miran believes that the neutral interest rate should be about a full percentage point lower, around 3.1%, indicating the need for two more rate cuts [3]. Group 2: Inflation Measurement - Miran argues that high inflation numbers are more a result of measurement methods by the Commerce and Labor departments rather than true economic pressures [3]. - He cites portfolio management fees, which have increased due to a rising stock market, as a factor contributing to perceived inflation, despite the underlying rates remaining stable [4]. Group 3: Oil Prices and Core Inflation - Miran downplays the impact of rising oil prices on inflation, stating that such increases are typically one-off shocks that do not warrant a Federal Reserve response [5]. - He emphasizes that core inflation, excluding energy prices, is a better predictor of medium-term inflation trends than headline inflation [5]. Group 4: Governance and Future Outlook - Miran has consistently dissented at Federal Open Market Committee meetings, advocating for more aggressive rate cuts than those approved [5]. - He expresses hope for consensus on future rate cuts but acknowledges that the decision will depend on his colleagues [6].

Core Viewpoint - The article discusses the key signals and policies released during the press conference held by five major departments in China, focusing on monetary policy, financial risk prevention, and the opening up of the financial sector, which are crucial for the economic development in the "15th Five-Year Plan" period [3]. Monetary Policy - The government will continue to implement a moderately loose monetary policy, utilizing various policy tools such as reserve requirement ratio (RRR) cuts and interest rate reductions to support economic growth [5][7]. - The People's Bank of China (PBOC) aims to maintain ample market liquidity and ensure that the growth of social financing and money supply aligns with economic growth and price level expectations [7]. - The focus will be on supporting domestic demand, technological innovation, and small and micro enterprises while regulating financial institutions to optimize credit structures [7]. Financial Stability and Risk Prevention - The PBOC emphasizes the importance of balancing economic growth and financial risk prevention, stating that many economic issues manifest through financial channels [9]. - Significant progress has been made in reducing risks in key areas, with the number of financing platforms and their debt levels decreasing by over 70% compared to early 2023 [8]. - The PBOC will continue to guide local governments and financial institutions in managing debt risks and ensuring the stability of small and medium-sized banks [9]. Exchange Rate and External Environment - The PBOC acknowledges the complexity of exchange rate influences, including geopolitical events and monetary policies, which have led to increased volatility in international financial markets [10]. - The central bank will monitor external shocks and their potential impacts on China's financial market, employing macro-prudential tools to mitigate risks [10]. Financial Sector Opening - The article highlights the ongoing efforts to enhance the level of financial openness in China, with foreign institutions expected to hold over 10 trillion yuan in domestic RMB financial assets by the end of 2025 [12]. - The PBOC plans to continue expanding high-level financial openness, improving the transparency and predictability of financial policies, and promoting the internationalization of the RMB [12][13]. - There is a commitment to strengthening regulatory capabilities to match the high-level opening of the financial sector, ensuring financial security [13].

1. Report Industry Investment Rating No information provided in the report regarding the industry investment rating. 2. Core Viewpoints of the Report - In February 2026, the central bank slowed down its bond - buying pace and lowered the forward foreign exchange sales risk reserve ratio. The overall liquidity in February was stable during the Spring Festival, and the capital performance before the Spring Festival was more stable under the central bank's active support. The capital gap in March is not significant, and the central bank is expected to maintain a relatively active investment state [1][3][4]. - The impact of exchange - rate appreciation on liquidity is basically offset. The central bank's reduction of the forward foreign exchange sales risk reserve ratio to 0% will help ease the RMB appreciation rate. The inter - bank self - regulatory supervision may be further refined, and in the short term, some banks may use certificates of deposit to undertake, which is beneficial for banks to reduce liability costs in the long term [5][74][78]. 3. Summary by Directory 2.1 February Capital and Liquidity Review: Stable across the Spring Festival 2.1.1 Capital Review: Narrow - range Fluctuation of Capital - In February 2026, the overnight capital fluctuation range narrowed compared with the previous month, and the 7D capital fluctuation range slightly expanded. The overnight capital fluctuated within a range of 0.12%, and the 7D capital basically ran stably between 1.45% - 1.55%. There was no inversion between overnight and 7D capital this month [12]. - At the beginning of the month, 70 billion yuan of 3M repurchase expired, and the central bank over - renewed 10 billion yuan. From February 5th to 12th, the central bank injected 1.4 trillion yuan of short - term funds through 14 - day reverse repurchase. On the 13th, the central bank over - renewed 50 billion yuan of 6M repurchase. Affected by factors such as pre - holiday cash withdrawal, government bond issuance, and new share subscriptions on the Beijing Stock Exchange, the capital price fluctuated briefly, with DR007 rising to 1.55%. By the end of the month, the capital market remained stable [13]. - The capital stratification pressure in February was at a seasonal low. The volatility of the spread between R007 and DR007 during the Spring Festival was smoothed out, and the spread between GC007 and DR007 rose from about 5bp at the beginning of the month to 10bp at the end of the month, both at seasonal lows [20]. - The volatility of overnight and 7D capital was at a seasonal low. The daily average trading volume of inter - bank pledged repurchase in February decreased compared with the previous month, with a monthly total of about 117 trillion yuan. The net lending scale of banks decreased, and the net lending scale of money market funds was relatively low [26][27][30]. 2.1.2 Liquidity Review: Temporary Consumption of Liquidity by Government Bond Payment and Spring Festival Cash Withdrawal - **Liquidity Aggregate**: In February, the base money increased by about 63 billion yuan. The government deposit consumed about 24 billion yuan of base money, the central bank's net investment was 82.19 billion yuan, and foreign exchange funds had a net investment of 5 billion yuan. After considering factors such as reserve freezing, cash withdrawal, and non - financial institution deposit changes, the excess reserve at the end of the month decreased by about 500 billion yuan, and the excess reserve ratio was about 0.93%, at a seasonal low. The narrow - sense excess reserve level after deducting reverse repurchase was about 0.37%, close to the seasonal level [32]. - **Open - market Operations**: In February, the central bank slightly withdrew short - term reverse repurchase in the open market, with a net investment of - 12.05 billion yuan and a reverse repurchase balance of 164 billion yuan at the end of the month, at a seasonal neutral level. The MLF investment was 60 billion yuan, with 30 billion yuan due, and the MLF balance was 7.25 trillion yuan. The net investment of 3M and 6M repurchase was 60 billion yuan, with a balance of 7.4 trillion yuan. The central bank's net purchase of government bonds was 5 billion yuan, 5 billion yuan less than the previous month. Other tools included a 15 - billion - yuan treasury time - deposit operation, with 15 billion yuan due, and PSL and other structural tools had an investment of 0 billion yuan and - 7.6 billion yuan respectively [34][40][43]. 2.2 February Monetary Policy Tracking: Slower Bond - buying Pace by the Central Bank and Lowered Forward Foreign Exchange Sales Risk Reserve Ratio - The central bank's bond - buying scale in February decreased to about 5 billion yuan, slightly lower than market expectations. The 10 - year government bond yield was relatively low, and the decrease in the central bank's bond - buying volume may reflect a relatively cautious attitude [50]. - The fourth - quarter monetary policy meeting in 2025 continued the moderately loose tone, with relatively limited incremental information. The central bank emphasized guiding short - term interest rates to operate around policy rates. The central bank decided to lower the forward foreign exchange sales risk reserve ratio from 20% to 0% starting from March 2nd to ease the RMB appreciation expectation [49][54]. 2.3 March Gap Prediction: Limited Capital Gap Pressure 2.3.1 Rigid Gap: Slight Consumption of Excess Reserves by Reserve Requirements and Slight Recovery of 3M Repurchase - In March, as it is a large - deposit month, the increase in general deposits will consume about 44 billion yuan of excess reserves. The MLF due amount is 45 billion yuan, slightly larger than the previous month. The total due amount of repurchase in March is 1.6 trillion yuan, including 1 trillion yuan for 3M and 600 billion yuan for 6M. Currently, 80 billion yuan of 3M repurchase has been renewed [58]. 2.3.2 Exogenous Shocks: Post - holiday Return of Cash Withdrawal and Non - financial Institution Deposits - Referring to previous years with a late Spring Festival, the "currency issuance" item in the central bank's statement may supplement about 44.07 billion yuan of excess reserves in March. The non - financial institution deposits may also supplement about 10.55 billion yuan of excess reserves [63]. 2.3.3 Fiscal Factors: Limited Government Bond Issuance and Season - end Fiscal Expenditure as a Benefit - Considering factors such as bond payment, tax revenue, and fiscal expenditure, the government deposit is expected to supplement about 64.15 billion yuan of liquidity in March [64]. 2.3.4 Comprehensive Judgment: Limited Season - end Liquidity Pressure - Overall, the capital gap in March is not significant. The main pressures come from quarter - end reserve requirements and tool maturities. Considering the central bank's current operation ideas, it is expected to maintain a relatively active investment state, and the capital pressure is limited [67]. 2.4 Other Factors - The impact of exchange - rate appreciation on liquidity is basically offset. The increase in market settlement demand leads to an increase in RMB deposits, and the reserve requirements freeze about 74.4 billion yuan of liquidity. However, the central bank's foreign exchange funds increased by 5 billion yuan in January, which basically offsets the impact on narrow - sense liquidity [5][72]. - The central bank's reduction of the forward foreign exchange sales risk reserve ratio to 0% will help ease the RMB appreciation rate. The inter - bank self - regulatory supervision may be further refined. If high - interest inter - bank deposits are reduced, banks may use certificates of deposit as a substitute. If the supply demand for certificates of deposit increases in March, the pricing may be slightly adjusted upwards, but the adjustment range is relatively controllable [74][78].

Core Viewpoint - The article discusses the upcoming reforms in China's capital markets, particularly focusing on the new policies aimed at enhancing the stability and attractiveness of the A-share market, as well as the government's commitment to supporting economic growth through various fiscal and monetary measures. Group 1: Capital Market Reforms - A new reform plan for the ChiNext board is set to be launched, introducing more precise and inclusive listing standards [7] - The total market capitalization of the A-share market has exceeded 110 trillion yuan [7] - Since the release of the new "National Nine Articles," listed companies have distributed dividends totaling 5.23 trillion yuan, marking a historical high [7] - The market is showing signs of recovery and positive trends are being consolidated [7] - The regulatory framework for securities companies is being revised to enhance the quality of listed companies [7][8] Group 2: Financial and Monetary Policies - The People's Bank of China is implementing a moderately loose monetary policy, utilizing various tools such as reserve requirement ratio cuts and interest rate reductions to ensure ample market liquidity [9] - Approximately 2 trillion yuan of medium- and long-term funds have been net injected into the market over the past two months [9] - The government aims to enhance the effectiveness of fiscal policies, with a focus on boosting consumer spending and private investment [19][20] Group 3: Economic Growth and Investment - The GDP increment for this year is expected to exceed 6 trillion yuan, with significant investments planned in key sectors [12] - The government is targeting an investment of over 7 trillion yuan in the construction of key infrastructure projects [12] - The focus will be on developing six emerging pillar industries and six future industries, with an anticipated addition of over 10 trillion yuan to traditional industries in the next five years [13]

Economic Growth Target - The government aims for an economic growth target of 4.5% to 5% for the year, with a focus on achieving better results in practice [4][3] - The National Development and Reform Commission emphasizes a solid foundation for this target, highlighting total scale, innovation capability, and risk response as key factors [4][5] Fiscal Policy - The fiscal policy will continue to be "more proactive," building on last year's efforts, with a focus on maintaining strong support and enhancing policy coordination [6][10] - The total economic output exceeded 140 trillion yuan last year, marking a new milestone, and the government plans to increase fiscal spending significantly [7][14] Financial Measures - The central bank will implement a moderately loose monetary policy, utilizing various tools such as reserve requirement ratio cuts and interest rate reductions to create a favorable financial environment [11] - A new fiscal-financial collaborative policy tool will be established to stimulate domestic demand, focusing on consumer spending and private investment [14] Industry Development - The government plans to focus on six emerging industries, including integrated circuits, aerospace, biomedicine, low-altitude economy, new energy storage, and intelligent robotics, with projected output reaching 10 trillion yuan by 2030 [13][15] - The artificial intelligence industry is expected to exceed 10 trillion yuan by the end of the 14th Five-Year Plan [15] Employment and Education - The manufacturing and service sectors are projected to create over 10 million jobs annually during the 14th Five-Year Plan period, with significant growth potential [21] - Education initiatives include expanding high school capacity and increasing undergraduate enrollment at top universities by over 100,000 students [20] Social Services - The government will support the renovation of 2,000 public elderly care institutions and improve community services to enhance elderly care facilities [22][23] Capital Market Reforms - The China Securities Regulatory Commission is set to introduce more inclusive listing standards on the ChiNext board to support innovative enterprises in new consumption and modern services [24]

Core Viewpoint - The People's Bank of China (PBOC) is conducting an 800 billion yuan reverse repurchase operation to maintain liquidity in the banking system, marking the first reduction in the three-month reverse repo since June 2025, raising questions about potential tightening of medium-term liquidity and the possibility of a reserve requirement ratio (RRR) cut [3][4]. Group 1: Market Liquidity and PBOC Actions - The PBOC's decision to conduct a reverse repo operation of 800 billion yuan with a three-month term is aimed at ensuring sufficient liquidity in the banking system [3]. - The reduction in the three-month reverse repo operation does not necessarily indicate a tightening of liquidity, as it reflects the PBOC's assessment of current market conditions and future liquidity trends [3][4]. - In February, the PBOC injected a net 900 billion yuan into the market through various monetary policy tools, maintaining a relatively stable liquidity environment post-Spring Festival [3][4]. Group 2: Future Expectations and Economic Policy - In March, over 2 trillion yuan in medium-term liquidity is set to mature, including 1 trillion yuan in three-month reverse repos and 600 billion yuan in six-month reverse repos [4]. - Analysts suggest that the PBOC may increase the six-month reverse repo operations and maintain or increase MLF operations in March, indicating continued net liquidity injection [5]. - The government work report emphasizes the need for a moderately loose monetary policy to support stable economic growth and reasonable price recovery, with flexibility in using various policy tools [4][5].