Group 1: Report Industry Investment Rating - No investment rating information provided for the industry in the report Group 2: Core Views of the Report - The 2026 Government Work Report emphasizes promoting economic stability and reasonable price recovery as important considerations for monetary policy, which is consistent with the economic work conference in December last year and highlights the importance of promoting a reasonable and moderate increase in consumer prices and a virtuous economic cycle [1] - Since the fourth quarter of 2025, positive factors for price recovery have been accumulating. The year-on-year increase in CPI in December last year reached 0.8%, 1.2 percentage points higher than in August. In January this year, due to factors such as the lunar new year and international oil price changes, the year-on-year increase in CPI declined. The report believes that the expected target of a 2% increase in consumer prices is achievable through policy measures to improve the total supply and demand relationship [1] - Traditionally, bond yields are generally positively correlated with CPI. However, this year's real GDP growth is likely to be lower than last year, with prominent supply-demand imbalances, downward pressure on overall investment, and insufficient consumption growth, which put downward pressure on bond yields. Bond yields follow monetary policy, and the policy rate is more likely to respond to the downward pressure on the economy rather than inflation [2] - Recently, internal and external factors restricting interest rate cuts have significantly eased, and the implementation of policies depends on economic conditions. The average manufacturing PMI in January and February this year was 49.15%, lower than the 1/4 quantile of the 16 months from September 2024 to December 2025. The average values of the non-manufacturing business activity index, construction business activity index, and composite PMI output index in January and February were the lowest since September 2024 [3] - After the expectation of a 7D OMO interest rate cut is formed, the central value of the 10Y Treasury bond yield will decline. The 10Y Treasury bond yield has been oscillating in the range of 1.8% - 1.9% since the end of August 2025. After the interest rate cut expectation is formed (especially after implementation), the operating range of the 10Y Treasury bond yield may decline to 1.7% - 1.8% [3] - The current spread between the 10Y Treasury bond and 7D OMO is less than 40bp, which is still at a relatively low level historically and has limited room for further compression. The next 7D OMO interest rate cut is likely to result in a parallel shift of the short and long ends of the yield curve, with the interest rates of DR001, DR007, 1Y AAA - grade CD, and 10Y Treasury bond all declining by approximately 10bp [4] Group 3: Summary by Related Catalog 1. Price Recovery and Long - Term Bond Yields - The 2026 Government Work Report emphasizes promoting price recovery as an important consideration for monetary policy, and positive factors for price recovery have been accumulating since the fourth quarter of 2025. The expected target of a 2% increase in consumer prices is achievable [1] - There is a conflict between the upward pressure on bond yields from price indicators and the downward pressure from economic growth indicators. Bond yields follow monetary policy, and the policy rate is more likely to respond to the downward pressure on the economy [2] - The implementation of interest rate cut policies depends on economic conditions. After the expectation of a 7D OMO interest rate cut is formed, the central value of the 10Y Treasury bond yield will decline. The next 7D OMO interest rate cut is likely to result in a parallel shift of the short and long ends of the yield curve [3][4]

Report Industry Investment Rating - Not provided in the content Core Viewpoints - When studying the Two Sessions' Government Work Report, the bond market needs to focus on clues from the fiscal, monetary, and inflation aspects [2][7]. - The government's settings for fiscal deficits and new government debt in 2026 are relatively neutral and within the bond market's expectations. Attention should be paid to the supply - demand balance of ultra - long government bonds [2][4][7]. - The probability of the central bank implementing an interest rate cut during or after the Two Sessions is low, while the probability of a reserve requirement ratio cut coming first is relatively high [2][4][7]. - The inflation target in 2026 remains at 2%. The PPI is likely to turn positive in the second quarter, and inflation may affect bond market pricing through the stock - bond risk preference, especially for the ultra - long end [2][4][7]. Summary by Relevant Catalogs 1.1. Fiscal - The fiscal expenditure intensity will "only increase and not decrease", and the deficit rate remains flat. In 2026, the deficit rate is planned to be around 4%, corresponding to a deficit scale of 5.89 trillion yuan. The total new government debt scale is 11.89 trillion yuan, 300 million yuan more than in 2024 [8]. - It is the first time to detail the specific uses of ultra - long special treasury bonds in the government work report. In 2026, 800 billion yuan of the 1.3 trillion yuan is for "two major" construction, 200 billion yuan for large - scale equipment renewal, and 250 billion yuan for consumer goods trade - in [11]. - The overall fiscal policy strength is at the lower end of the bond market's expectations. The bond market's expectations for new government debt scale were relatively neutral, and the actual policy strength basically met the expectations [14]. - Attention should be paid to the supply - demand balance of ultra - long government bonds. The issuance terms of local replacement bonds and special bonds are still long. The issuance of ultra - long special treasury bonds may raise concerns about the duration index constraints of large banks' allocation portfolios. The absence of special treasury bonds for large insurance companies will also affect the bond - allocation power of insurance institutions [15]. 1.2. Monetary - The monetary policy maintains a moderately loose tone with limited incremental guidance. The statements in the government work report are consistent with previous reports and meetings [20]. - If the fiscal policy remains relatively neutral, the probability of an interest rate cut during or after the Two Sessions is low. The central bank still pays attention to the long - term bond interest rate, as seen from the marginal reduction in net treasury bond purchases in February [20]. - Due to large maturities of repurchase and MLF in March and increased stock market volatility, the probability of a reserve requirement ratio cut coming first is relatively high [21]. 1.3. Inflation - The inflation target in 2026 remains at 2%, emphasizing the role of "expectation guidance". The PPI is likely to turn positive in the second quarter [22]. - Domestic inflation is affected by the Iran conflict and price increases in various industries. The PPI's repair will be steeper than the CPI's. Inflation may affect bond market pricing through the stock - bond risk preference, especially for the ultra - long end [23].

Core Viewpoint - The article discusses the upcoming Guotai Haitong Spring Strategy Conference 2026, focusing on macroeconomic outlooks, policy insights, and investment opportunities across various sectors, particularly in AI, real estate, and global economic shifts [1][2]. Group 1: Macroeconomic and Policy Outlook - The conference will feature speeches on China's macroeconomic and policy outlook, as well as the U.S. economic and monetary policy perspectives [2]. - Keynote speakers include prominent figures from academia and finance, providing insights into the current economic landscape and future trends [2][11]. Group 2: AI and Technology Trends - The conference will explore the rapid development of AI applications and their implications for various industries, including marketing, storage, and computing [4][6]. - Discussions will include the impact of AI on CPU demand and the evolution of AI-driven business models [5][6]. Group 3: Real Estate and Investment Strategies - A session will focus on the outlook for real estate prices in 2026, addressing market trends and investment opportunities [7][10]. - The conference will also cover strategies for investing in high-dividend and technology transformation sectors [10][22]. Group 4: Global Economic Changes - The event will address the reshaping of international order and its effects on asset pricing, highlighting the need for adaptive investment strategies [5][8]. - Topics will include geopolitical dynamics and their influence on China's policy choices and economic strategies [15][19]. Group 5: Sector-Specific Insights - Various sessions will delve into specific sectors such as renewable energy, consumer goods, and healthcare, discussing growth prospects and investment strategies [25][27]. - The conference will also feature insights into the evolving landscape of commercial aerospace and the implications for investment [22][39].

Economic Outlook - Short-term economic growth risks are primarily due to rising external trade protectionism, while medium-term growth can be driven by innovation and technological advancements[6] - Both IMF and the company believe inflation will gradually rise, with the company emphasizing that deflationary pressures are not long-term and are mainly due to weak demand and "involution"[6][8] Fiscal Policy - IMF suggests expanding fiscal policy support in 2026 by approximately 0.8% of GDP, shifting focus from inefficient investments to social safety nets and the real estate sector[12] - The company emphasizes the sustainability of fiscal policy and the need for targeted measures to improve the tax-to-GDP ratio through tax reform and better tax collection[12][13] Monetary Policy - IMF advocates for further monetary easing, recommending a 50 basis point cut in policy rates to address deflationary pressures[15] - The company supports a flexible approach to monetary policy adjustments based on economic data, rather than aggressive easing measures[15] Real Estate Market - The company believes the real estate market is nearing a bottom and shows signs of stabilization, focusing on housing affordability and inventory optimization[18] - IMF recommends significant targeted funding support equivalent to 5% of GDP for unfinished housing projects, while the company prefers market-driven solutions[18][19] Consumer Spending - IMF identifies the transition to a consumption-driven economy as a priority, suggesting structural reforms to lower savings rates and boost consumption[24] - The company acknowledges the importance of consumer recovery as a long-term process, advocating for gradual measures to stimulate demand[25] Government Debt - The company asserts that government debt is manageable and does not agree with IMF's aggressive definitions and restructuring proposals for local government financing platforms[31][32] Financial Sector Risks - The company believes the financial sector is generally stable, rejecting the notion of significant systemic risks, while acknowledging some pressure on net interest margins[34] Risk Warnings - Historical patterns may not predict future outcomes, and macroeconomic conditions are subject to rapid changes that could affect the analysis[35]

Economic Growth and Inflation - The government has set the economic growth target for 2026 at 4.5%-5%, allowing for flexibility in policy implementation while aiming for better outcomes [2] - The CPI target for 2026 remains at 2%, with a focus on controlling inflation and improving corporate profitability and household income expectations [2] Employment Stability - The target for urban new employment in 2026 is maintained at over 12 million, with the urban survey unemployment rate aimed to stay around 5.5% [3] Fiscal Policy - The government plans to implement a more proactive fiscal policy, maintaining a deficit rate around 4% and increasing the deficit scale to 5.89 trillion yuan [6] - Local special bond quotas are set at 4.4 trillion yuan, and the issuance of long-term special government bonds is planned at 1.3 trillion yuan to support key initiatives [6] Efficiency of Fiscal Funds - The fiscal policy structure will focus on enhancing the effectiveness of fund usage, with an emphasis on supporting consumption, investment in human capital, and ensuring livelihood [9] Monetary Policy - The monetary policy will continue to be moderately loose, utilizing structural monetary policy tools to support domestic demand and key sectors such as technology and small enterprises [9] Consumer Promotion - The government will enhance consumer policies, including support for low-income groups and the promotion of service consumption, aiming for sustainable growth in domestic demand [12] Investment Focus - The investment strategy will prioritize both "investment in material" and "investment in people," with an increase in central budget investment and support for social capital investment [13] New Economic Drivers - The report emphasizes the importance of the real economy, with plans to support traditional industries and develop emerging sectors such as integrated circuits and aerospace [14] Real Estate Market - The government aims to stabilize the real estate market by optimizing supply and enhancing housing security for newly married and multi-child families [14]

Economic Growth and Inflation - The government sets the economic growth target for 2026 at 4.5%-5%, allowing flexibility for structural reforms and risk management[2] - The CPI target for 2026 is set at 2%, with a prior target of around 3% until 2025 to control inflation[2] Fiscal Policy - The deficit rate is maintained at around 4%, with the deficit scale increasing to 5.89 trillion yuan from 5.66 trillion yuan in 2025[3] - Local special bond quota remains at 4.4 trillion yuan, while 1.3 trillion yuan in long-term special bonds will be issued for key projects[3] Monetary Policy - The monetary policy remains "appropriately loose," with structural tools expanded to support domestic demand and innovation[3] - The focus is on reducing financing costs for key sectors, including small and medium enterprises[3] Consumer Promotion - Policies to boost consumption include 2.5 billion yuan in special bonds for upgrading consumer goods and 1 billion yuan in financial support for domestic demand[4] - Emphasis on income distribution reform and public service equalization to stimulate sustainable consumer growth[4] Investment Strategy - Central budget investment is increased to 755 billion yuan, with a focus on enhancing public welfare investments[4] - The issuance of new policy financial instruments totaling 800 billion yuan aims to attract private capital for major projects[4]

Economic Growth Targets - The GDP growth target for 2026 is set at "4.5%-5%", adjusted from the previous "around 5.0%" over the past two years, aligning with market expectations[1] - The adjustment reflects a natural decline in growth rates as the economy matures and aims to balance growth, structural adjustment, and risk control[1] Consumer Price Index (CPI) Goals - The target for the CPI increase is set at "around 2%", consistent with last year, which is significant given the 0% cumulative CPI increase in 2025[2] - This target aims to guide macroeconomic policy towards a reasonable recovery of price levels and avoid hidden deflation, which could hinder consumption and investment growth[3] Fiscal Policy Measures - The target fiscal deficit rate is proposed at "around 4%", with no increase in the issuance of special government bonds and local government bonds compared to last year[4] - The nominal fiscal deficit is expected to rise from 5.66 trillion yuan in 2025 to 5.89 trillion yuan in 2026, reflecting an expanding nominal GDP[4] Monetary Policy Outlook - The monetary policy will maintain an "appropriately loose" stance, with potential for interest rate cuts of 0.2 to 0.3 percentage points throughout the year[5] - The central bank is expected to utilize various tools to ensure liquidity remains ample, supporting economic growth and price stability[6] Domestic Market Development - The report emphasizes "building a strong domestic market" as a top priority, with 250 billion yuan allocated for consumption incentives, although this is a reduction from last year[7] - New policy financial tools worth 800 billion yuan are expected to drive an additional 9 trillion yuan in overall investment over three years, stabilizing investment growth[7] Risk Management in Real Estate - The report outlines strategies to stabilize the real estate market, focusing on supply-side measures and encouraging the acquisition of existing properties for affordable housing[9] - A significant increase in loan quotas for "white list" projects in real estate is anticipated, rising to 7 trillion yuan, to support housing stability[10] Local Government Debt Management - The focus will shift towards managing operational debt risks of local government financing platforms, with strategies including debt restructuring and optimizing repayment methods[11] - The report indicates a transition from addressing hidden local government debts to managing market-driven operational debts of financing platforms[12]

Report Summary 1. Industry Investment Rating - No industry investment rating is provided in the report. 2. Core Viewpoints - The price of treasury bond futures fluctuated slightly, with the yield of the 10-year treasury bond active bond falling to 1.79%. The central bank's open - market reverse repurchase had a net withdrawal of 36.9 billion yuan. The MLF was increased and renewed for the 12th consecutive month, and the LPR remained unchanged for the 9th consecutive month. Shibor short - term varieties declined, and the capital market became looser. Tensions in the Middle East supported the US dollar index, and rising oil prices pushed up inflation expectations, leading to an increase in US bond yields and greater fluctuations in the equity market. China's February official manufacturing PMI was 49.0%, a 0.3 percentage - point decrease from the previous month. In January, corporate medium - and long - term loans remained high, and the M2 growth rate rebounded to 9%, a two - year high. The combination of a more proactive fiscal policy and a moderately loose monetary policy continued, and the central bank still had room for RRR and interest rate cuts. Short - term support for treasury bond futures prices was formed, and attention should be paid to the Middle East situation and policies from the Two Sessions [3]. 3. Summary by Directory Futures Market - **Price and Volume**: The prices of treasury bond futures rose and fell unevenly. For example, the T2606 contract rose 0.05%, and positions increased. The T2606 contract had a closing price of 108.555, up 0.055 from the previous day, with a trading volume of 68,845 and an increase in positions of 7,191 [2]. - **IRR**: The IRR of the CTD bonds corresponding to the main contracts of treasury bond futures was at a low level, with no arbitrage opportunities. For instance, the IRR of the active CTD bond for the T2606 contract was 1.5911% [2]. - **Spread**: The inter - period spreads of some contracts changed. For example, the inter - period spread of the TS2606 - TS2609 was - 0.022, up from the previous value of - 0.026 [2]. Spot Market - **Short - term Market Interest Rates**: Short - term market interest rates rose and fell unevenly. SHIBOR 7 - day interest rate dropped 3.3bp to 1.4150%, DR007 dropped 1.13bp to 1.4965%, and GC007 dropped 0.1bp to 1.4860% [2]. - **China's Key - term Treasury Bond Yields**: The yields of key - term treasury bonds rose and fell unevenly. The 10Y treasury bond yield dropped 0.18bp to 1.78%, and the long - short (10 - 2) treasury bond yield spread was 36.14bp [2]. Overseas Market - The US 10Y treasury bond yield rose 3bp to 4.09%, the German 10Y treasury bond yield dropped 4bp to 2.82%, and the Japanese 10Y treasury bond yield dropped 1.4bp to 2.134% [2]. Macro News - **Central Bank Operations**: On March 4, the central bank conducted 4.05 billion yuan of 7 - day reverse repurchase operations, with a net withdrawal of 36.9 billion yuan due to 40.95 billion yuan of reverse repurchase maturities [3]. - **Two Sessions**: The Fourth Session of the 14th National People's Congress opened on March 5. The "14th Five - Year Plan" draft will be reviewed, and policies related to expanding domestic demand, boosting consumption, and promoting the private economy are expected [3]. - **PMI Data**: China's February official manufacturing PMI was 49.0%, indicating a slowdown in corporate production and operation. The non - manufacturing PMI rose 0.1 percentage point to 49.5%, showing some improvement [3]. - **Middle East Situation**: The US - Iran conflict may last for 8 weeks or more. China will send a special envoy to the Middle East to mediate [3]. - **Interest Rate Changes**: In the domestic money market, most interest rates rose and fell unevenly. US bond yields rose across the board [3].

Core Viewpoint - The government work report emphasizes the importance of financial policies, highlighting a proactive fiscal policy and moderately loose monetary policy to support economic stability and growth [1][4]. Financial Policy Overview - The report mentions the implementation of a more proactive fiscal policy and moderately loose monetary policy, aiming to expand fiscal spending and lower policy interest rates and reserve requirement ratios [1]. - It stresses the need for coordinated macro policies, including risk resolution in real estate, local government debt, and small financial institutions [1][7]. Monetary Policy Measures - The report outlines the continuation of moderately loose monetary policy, focusing on stabilizing economic growth and reasonable price recovery, utilizing various policy tools like reserve requirement ratio cuts and interest rate reductions [4]. - It emphasizes optimizing structural monetary policy tools and ensuring the smooth transmission of monetary policy, while supporting key areas such as domestic demand, technological innovation, and small and micro enterprises [4]. Risk Management and Financial Stability - The report highlights the importance of risk resolution in the financial sector, particularly for local small financial institutions, and the need for market-oriented and legal principles in addressing high-risk institutions [7]. - It calls for enhanced financial supervision and monitoring to prevent illegal financial activities and improve early warning systems for financial risks [7]. Support for Specific Sectors - The establishment of a 100 billion yuan fiscal-financial collaborative fund to support domestic demand is mentioned, along with policies to increase personal consumption loans and support for the service industry [4]. - The report also emphasizes the need for comprehensive financial services for technological innovation and the promotion of a long-term care insurance system to support the aging population [7].

Economic Development Goals - The GDP growth target for 2025 is around 5%, with an actual value of 5% for 2026, aiming for a range of 4.5%-5% [2][4] - The urban survey unemployment rate is targeted to be controlled within 5.5% for both 2025 and 2026, with an expected addition of over 12 million urban jobs each year [16][10] - The consumer price index (CPI) target for both 2025 and 2026 is set at around 2% [5] Innovation and Technology - The average annual growth of R&D expenditure is expected to exceed 7%, with the digital economy's core industry value added accounting for 12.5% of GDP [2] - The government aims to enhance the manufacturing sector's stability and promote the development of a modern industrial system [2] Green Development - The forest coverage rate is targeted to reach 24.1%, with a focus on reducing carbon emissions by 17% per unit of GDP by 2026 [3] - The government plans to eliminate heavy pollution weather and urban black and odorous water bodies [3] Fiscal Policy - The fiscal deficit rate is proposed to be around 4% for the current year, with a deficit scale of 5.89 trillion yuan, an increase of 230 billion yuan from the previous year [8] - The total scale of new government debt is expected to reach 11.86 trillion yuan, with a significant increase in fiscal spending [12] Investment and Infrastructure - Central budget investment is planned at 755 billion yuan, with 800 billion yuan allocated for long-term special bonds to support major projects [12][19] - Local government special bonds are set at 4.4 trillion yuan for 2025, with a focus on infrastructure and debt replacement [12][11] Employment and Social Welfare - The average education level of the working-age population is targeted to increase to 11.3 years, with per capita disposable income growth synchronized with GDP growth [3][17] - The government aims to improve the medical service network and increase the proportion of nursing beds in elderly care institutions to 73% [3] Real Estate and Housing - The government emphasizes that housing is for living, not speculation, with ongoing efforts in urban affordable housing construction and rural housing renovation [25]