Economic Performance Overview - In May, China's economic resilience and vitality were highlighted by a 6.2% year-on-year increase in the service sector production index, driven by strong consumer engagement during the "May Day" and "Dragon Boat" holidays [1] - The "618" online shopping promotion, which started on May 13, saw a 6.3% year-on-year increase in online retail sales of physical goods, boosted by a policy encouraging the exchange of old consumer goods for new ones [1] External Trade and Tourism - The expansion of visa-free entry for foreign nationals has stimulated the domestic consumption market, with a notable increase in foreign tourists participating in local cultural experiences [2] - Payment transactions from foreign visitors to China surged, with the number of transactions increasing by 2.4 times and the transaction amount rising by 1.3 times [2] Innovation and Industrial Development - The manufacturing of intelligent unmanned aerial vehicles and smart vehicle-mounted devices has gained positive recognition, indicating a rapid advancement in industrial intelligence and its role in promoting industrial upgrades [2] - The transition from old to new economic drivers is ongoing, with innovation playing a crucial role in driving development [2] Economic Strategy and Future Outlook - Despite uncertainties in the international environment and persistent domestic economic challenges, there is a strong emphasis on expanding domestic demand and strengthening the domestic circulation to ensure sustainable economic growth [2]

Investment Rating - The report maintains a positive outlook on the banking sector, indicating potential for absolute and relative returns in the short, medium, and long term [2][3]. Core Insights - The M1 growth rate has rebounded, signaling economic vitality, although it remains below seasonal norms. The increase in M1 is primarily attributed to a low base effect from the previous year [1][2]. - Credit growth in May was 0.62 trillion, which is lower than the seasonal average, but the real credit demand appears stable as indicated by the increase in non-bill financing [1][2]. - The fiscal strength indicator has shown a significant decline, suggesting a need to monitor the sustainability of fiscal efforts moving forward [2]. Summary by Sections Financial Data Analysis - M1 growth increased by 0.8 percentage points, with a monthly decrease of 0.23 trillion in May 2025, compared to a net decrease of 1.08 trillion in May 2024 [1]. - Total credit increased by 0.62 trillion in May 2025, lower than the 0.95 trillion in May 2024 and 1.36 trillion in May 2023, indicating that credit growth has not yet returned to seasonal levels [1]. Economic Outlook - The report emphasizes that while M1 and credit indicators show no further weakening in economic vitality, they have not yet returned to normal seasonal levels. Future attention should be given to the sustainability of fiscal efforts and the liquidity effects following large bank capital injections [2]. - The banking sector is expected to benefit from structural optimization and increased fiscal support directed towards social welfare areas, which could enhance both short-term demand and long-term supply [2][3]. Investment Recommendations - The report suggests a balanced investment approach across state-owned, joint-stock, and regional banks, focusing on those with superior free cash flow valuations [3]. - It highlights that high-dividend banks are likely to outperform in relative returns due to their defensive advantages amid external uncertainties [3].

Group 1: Trade and Financial Support - China Export-Import Bank has issued loans totaling 460 billion yuan in the foreign trade sector in the first five months of 2025, focusing on supporting private and small to medium-sized foreign trade enterprises [1] - A total of 37 billion yuan in themed financial bonds for the foreign trade sector has been issued, specifically allocated for credit support in this area [1] Group 2: Retail Industry Innovation - The Ministry of Commerce and other five departments have designated 38 cities, including Beijing, Shanghai, and Guangzhou, as the first batch of national retail innovation and enhancement pilot cities [2] - These cities will implement tailored strategies for store renovations, optimize product and service supply, and enhance supply chains to build a modern retail system characterized by rich supply, quality service, smart convenience, and green low-carbon practices [4] Group 3: Nansha Free Trade Zone Growth - Over the past 10 years, the Nansha Free Trade Zone has seen an average annual growth rate of 10% in foreign trade, with the import and export value increasing from 74.8 billion yuan in 2015 to 191.36 billion yuan in 2024 [5] - In the first four months of 2025, the Nansha Free Trade Zone recorded an import and export value of 81.22 billion yuan, representing a year-on-year increase of 32.8% [7] Group 4: Housing Project Standards - The Ministry of Housing and Urban-Rural Development is accelerating the revision of supporting national and industry standards in line with the implementation of the "Residential Project Specifications" starting May 1 [8] - The "Residential Project Specifications" provide systematic regulations for the construction, use, and maintenance of residential projects, establishing baseline requirements for quality housing [10] Group 5: Tianjin International Cruise Port - Tianjin International Cruise Port has resumed its dual cruise port model with the arrival of the "Mediterranean" cruise ship, marking the return of this operational mode [12] - Since the beginning of 2025, Tianjin Cruise Port has welcomed 70 cruise ships, with expectations to exceed 210 cruise ship arrivals and over 300,000 tourists for the year [14]

Market Overview - The Shanghai Composite Index is at 3380.82[1] - The CSI 300 Index stands at 3907.20[1] - The Shenzhen Component Index is reported at 10186.44[1] Social Financing Insights - In April 2025, the social financing increment was 1.16 trillion CNY, down from 5.89 trillion CNY in March 2025, slightly below the market expectation of 1.26 trillion CNY[7] - The year-on-year increase in social financing increment for April 2025 was 1.22 trillion CNY, the highest since February 2023[8] - The government bond financing in April 2025 increased by 1.07 trillion CNY, accounting for 87.7% of the total social financing increment[8] Loan Dynamics - The new RMB loans recorded a year-on-year decrease of 246.5 billion CNY in April 2025, only 11% of the average for the same month over the past five years, indicating a significant lack of demand for financing in the real economy[8] - The total new RMB loans for April 2025 were reported at -2.45 trillion CNY, compared to 5.31 trillion CNY in March 2025[10] Monetary Supply Trends - M2 growth rate in April 2025 was +8.0%, an increase of 1.0 percentage points from the previous month, while M1 growth rate was +1.5%, a decrease of 0.1 percentage points[15] - The decline in the M1-M2 gap indicates a decrease in economic vitality[15] Investment Recommendations - Buy: Expected investment returns over the next six months are projected to exceed a 10% increase relative to the CSI 300 Index[18] - Hold: Expected investment returns are projected to be between -10% to +5% relative to the CSI 300 Index[18]

Core Viewpoint - The Indian government and the European Union recognize the critical role of investment flows and personnel exchanges in maintaining economic vitality [1] Group 1 - The acknowledgment of investment flows as essential for economic activity highlights the importance of cross-border capital movement [1] - Personnel exchanges are seen as a key factor in fostering economic relationships and enhancing productivity [1]

Group 1: Service Trade - In Q1 2025, China's service trade grew rapidly, with total service import and export amounting to 19,741.8 billion RMB, a year-on-year increase of 8.7% [1] - The service trade deficit was 3,038.8 billion RMB, a decrease of 244.6 billion RMB compared to the same period last year [1] Group 2: Cultural Industry - In Q1 2025, the revenue of cultural and related industries reached 33,939 billion RMB, a year-on-year growth of 6.2%, with the growth rate accelerating compared to the entire year of 2024 [7] - The cultural new business formats achieved revenue of 14,846 billion RMB, a year-on-year increase of 12.5%, contributing 83.5% to the revenue growth of all large-scale cultural enterprises [10] - The profit of large-scale cultural enterprises totaled 2,744 billion RMB, a year-on-year increase of 29.1%, with significant profit contributions from digital content services and internet cultural platforms [13] Group 3: Logistics - In Q1 2025, the total social logistics reached 91 trillion RMB, a year-on-year increase of 5.7%, with industrial product logistics growing by 5.9% [14] - The demand structure for logistics improved, driven by policies such as large-scale equipment updates and consumption upgrades [14] - Online retail of physical goods saw a year-on-year growth of 5.7%, indicating a robust online consumption trend [16] Group 4: Employment - In Q1 2025, 3.08 million new urban jobs were created, an increase of 50,000 compared to the previous year, with the urban survey unemployment rate at 5.2% [16] - The government has issued over 640 billion RMB in special loans to stabilize and expand employment, benefiting over 5.3 million jobs [17] Group 5: Social Security - By the end of March 2025, the number of people covered by basic pension, unemployment, and work injury insurance reached 1.071 billion, 244 million, and 297 million respectively, showing an increase from the previous year [19] - The total income of the three social insurance funds in Q1 was 2.36 trillion RMB, with total expenditures of 1.94 trillion RMB, maintaining a stable fund operation [21] Group 6: Marine Economy - In Q1 2025, China's marine production value reached 25 trillion RMB, a year-on-year increase of 5.7%, outpacing the GDP growth rate [22][23] - The marine traditional industries showed stable progress, with significant growth in shipbuilding orders and exports of marine engineering equipment [25]