Group 1 - The strong export performance in China has led to a significant trade surplus, but the actual and nominal exchange rates of the RMB are declining, influenced by global uncertainties and geopolitical conflicts [1] - The future outlook suggests a notable depreciation of the US dollar over the next 5 to 10 years, with a marginal decline in its status as a global reserve currency [1] - The undervaluation of the RMB's actual exchange rate is primarily due to insufficient demand, with recommended policy tools including counter-cyclical measures such as lowering policy interest rates and expanding public fiscal spending [1] Group 2 - The RMB is under upward pressure rather than downward pressure, supported by China's strong manufacturing capabilities and better pricing power in exports [2] - The strong fiscal net asset position, current low interest rates, and scarcity of overseas RMB assets create unprecedented opportunities for the internationalization of the RMB [2]

Report Summary 1. Report Industry Investment Rating No information provided on the report industry investment rating. 2. Core View of the Report - The prices of treasury bond futures generally rose, with the T2509 contract rising 0.2%, and the short - term market interest rates generally declined. The yields of key - term treasury bonds at home and abroad changed, and the price fluctuations of short - term treasury bond futures will continue to increase due to multiple factors [2][3]. 3. Summary by Relevant Catalogs Futures Market - **Prices and Volumes**: The prices of treasury bond futures generally rose, such as the T2509 contract rising 0.2%. The trading volume and open interest of each contract varied, with some open interest decreasing [2]. - **Arbitrage Opportunities**: The IRR of the CTD bonds corresponding to the main contracts of each treasury bond futures was at a low level, and there were no arbitrage opportunities [2]. Short - term Market Interest Rates - The short - term market interest rates generally declined. For example, the SHIBOR 7 - day rate decreased by 2.4bp, the DR007 rate decreased by 6.73bp, and the GC007 rate decreased by 2.9bp [2]. Spot Market - **Domestic Treasury Bond Yields**: The yields of key - term treasury bonds at home changed differently. The 10Y treasury bond yield decreased by 2.24bp to 1.72%, and the yield spread between long - and short - term (10 - 2) treasury bonds was 30.73bp [2]. - **Overseas Treasury Bond Yields**: The 10Y US treasury bond yield increased by 2bp, the 10Y German treasury bond yield decreased by 7bp, and the 10Y Japanese treasury bond yield decreased by 3.4bp [2]. Macro News - **Monetary Policy**: The central bank conducted 495.8 billion yuan of 7 - day reverse repurchase operations, with a net investment of 325.1 billion yuan [3]. - **Economic Meetings**: The national industrial and information authorities' symposium deployed eight key tasks for the second half of the year, including promoting industrial development and expanding domestic demand [3]. - **Other Policies**: The implementation plan of the national child - rearing subsidy system was officially announced, and the CF40 report suggested increasing counter - cyclical policies [3]. Industry Information - **Interest Rate Changes**: Most money market interest rates declined, and most US treasury bond yields fell. Trump's remarks affected the market's expectations of the Fed's policies [3]. Comment and Strategy - The price of 10 - year treasury bond active bonds rebounded significantly, and the yield dropped to 1.715%. Due to factors such as the central bank's operations, overseas economic data, and domestic policies, the price fluctuations of short - term treasury bond futures will continue to increase [3].

Core Viewpoint - China's economy grew by 5.3% in the first half of the year, exceeding the annual growth target, but the outlook for the second half remains cautious due to pressures from tariffs, real estate, and limited fiscal capacity [1][3]. Group 1: Economic Growth and Policy Recommendations - The report emphasizes the need for stronger counter-cyclical policies to achieve the annual economic growth target, given the marginal weakening of growth momentum in Q2 compared to Q1 [3][4]. - It suggests that the government should utilize public budget funds and consider issuing an additional 2.3 trillion yuan in government bonds to support fiscal spending [4]. - The report highlights the importance of urban renewal projects as a critical area for expanding domestic demand, especially as the effectiveness of existing policies like "trade-in" diminishes over time [4][5]. Group 2: Monetary Policy and Interest Rates - The report recommends lowering policy interest rates to guide market rates downwards, which is essential for restoring balance between private sector savings and investments [4][5]. - It notes that the current global environment, with many developed countries in a rate-cutting cycle, provides a favorable backdrop for such monetary easing [4]. Group 3: Currency Valuation and Exchange Rate Dynamics - The report discusses the depreciation of the RMB's real effective exchange rate by over 15% since 2022, attributing this to persistent domestic demand shortages [7][8]. - It emphasizes that the comparison of expected returns between RMB assets and foreign exchange assets is crucial for determining the supply and demand in the foreign exchange market [8]. - The report suggests that timely and sufficient counter-cyclical policies are necessary to achieve a reasonable valuation of the RMB's real effective exchange rate [8][9]. Group 4: Stablecoin Development and Internationalization of RMB - The report outlines the structural changes in the RMB exchange rate, including a shift in expectations and a changing interest rate environment, which could support the internationalization of the RMB [11]. - It discusses the potential pathways for advancing RMB stablecoin trials, emphasizing the need for onshore stablecoins due to the lack of application scenarios for offshore stablecoins [12]. - The report highlights the importance of strict regulation in the development of RMB stablecoins to avoid missing critical opportunities in the evolving financial landscape [12].

Core Viewpoint - The key to maintaining economic growth resilience in the second half of the year lies in expanding domestic demand, with fiscal expenditure being crucial [1][2][5]. Economic Performance - In the second quarter, China's GDP grew by 5.2% year-on-year, slightly weaker than the first quarter but still above the annual target of 5% [2][5]. - The nominal GDP growth rate for the second quarter was 3.9%, with the GDP deflator index remaining negative for nine consecutive quarters, indicating significant demand pressure [2][5]. Structural Analysis - Industrial production remains robust, with industrial added value growth consistently exceeding GDP growth [5]. - Exports have shown resilience, particularly to regions outside the U.S., despite a notable decline in exports to the U.S. [5]. - Retail sales growth has improved due to policies supporting trade-in programs, while fixed asset investment has weakened compared to the first quarter [5]. - The real estate market has shifted from signs of stabilization back to contraction, with new housing sales and second-hand home prices declining [5]. Recommendations for Expanding Domestic Demand - Suggestions include utilizing public budget funds and considering the issuance of an additional 2.3 trillion yuan in government bonds to meet annual fiscal expenditure growth targets [1][5]. - Emphasis on urban renewal and government-led public investment as a breakthrough point for expanding domestic demand [5]. - Proposals to further lower policy interest rates to guide market rates downwards and stimulate both supply and demand to help the real estate market recover [5]. Currency and Exchange Rate Insights - The report discusses the importance of achieving a reasonable valuation of the RMB's real effective exchange rate, emphasizing that it should not be excessively high or low [6][7]. - The depreciation of the RMB's real effective exchange rate since the first quarter of 2022 is attributed to persistent domestic demand shortages [6][7]. - Recommendations include implementing timely and sufficient counter-cyclical policies to address demand deficiencies and maintaining a flexible RMB exchange rate mechanism to avoid excessive distortions [7].

Core Viewpoint - The report highlights the need for further counter-cyclical policies to achieve the annual economic growth target in China, given the pressures from tariffs, real estate, and limited fiscal capacity. It emphasizes the importance of expanding domestic demand and its impact on the RMB exchange rate [1][2][4]. Economic Growth and Domestic Demand - China's GDP for the first half of the year was approximately 66.05 trillion yuan, reflecting a year-on-year growth of 5.3% [2] - The report indicates that fiscal measures, such as bond issuance and spending, have effectively supported economic growth in the first half of the year [2] - It suggests that the economic momentum weakened in the second quarter compared to the first, necessitating stronger counter-cyclical policies to address increasing demand pressures [2][3] Fiscal Policy Recommendations - The report recommends utilizing public budget funds and considering the issuance of an additional 2.3 trillion yuan in government bonds to meet the annual budget growth target [2][3] - It notes that the government plans to issue 7.6 trillion yuan in bonds from June to December, which is lower than the previous year's issuance [2] Domestic Demand Expansion Strategies - The report identifies urban renewal and transformation as a critical area for expanding domestic demand, suggesting it as a viable point for government-led public investment [3] - It advocates for lowering policy interest rates to guide market rates downwards, thereby improving inflation expectations and balancing private sector savings and investments [3] - The report emphasizes the need for simultaneous efforts on both supply and demand sides to revitalize the real estate market [3] RMB Exchange Rate Dynamics - The report discusses the undervaluation of the RMB's real effective exchange rate, which has depreciated over 15% since early 2022, despite improvements in export competitiveness [4][5] - It highlights that the nominal effective exchange rate's depreciation and the decline in domestic price levels relative to trade partners contributed significantly to this depreciation [5] - The report stresses that the comparison of expected returns on RMB assets versus foreign assets is crucial for determining the supply and demand in the foreign exchange market [5][6] RMB Stablecoin Development - The report outlines structural changes in the RMB exchange rate, including a shift in expectations and a changing interest rate environment, which may support RMB internationalization [7] - It discusses various options for advancing RMB stablecoin trials, emphasizing the need for onshore stablecoins due to limited application scenarios for offshore stablecoins [8][9] - The report suggests leveraging China's manufacturing and industrial chain advantages to expand offline applications for stablecoins [8]

Report Details - Report Date: July 27, 2025 [1] - Report Title: Nanhua Treasury Bond Futures Weekly Report Investment Rating - No investment rating information is provided in the report. Core Viewpoints - This week, the bond market experienced a significant adjustment. The main pressure came from risk assets, and the tightening of the capital market worsened the situation. Treasury bonds and commodities are two types of assets with highly similar but opposite price trends. When commodities rebounded, the bond market faced substantial pressure and significant pullbacks [2]. - In the medium - to long - term, fundamentals and liquidity expectations are the two most crucial factors for the bond market. The report does not believe that the fundamentals have changed drastically in just one week, nor does it think that production restrictions can solve demand - side problems. The significant fluctuations in commodities and the bond market are related to the long - term low (high) valuation and low - volatility market structure, and market behavior has amplified the intensity of the market [2]. Summary by Relevant Catalog 1. Market Data - **Futures Data**: The settlement prices of various Treasury bond futures contracts decreased this week. For example, the 10 - year Treasury bond futures T2509.CFE closed at 108.195, down 0.57%; the 30 - year Treasury bond futures TL2509.CFE closed at 118.120, down 2.00% [8]. - **Spread Data**: In terms of inter - period spreads, T2509 - T2512 was - 0.015, down 0.667; in terms of inter - variety spreads, 2TS - T was 301.109, up 0.183 [8]. - **Spot Bond Yields**: The yields of various Treasury bonds and policy - bank bonds increased this week. For example, the yield of the 10 - year Treasury bond rose 6.79 BP to 1.73%, and the yield of the 30 - year Treasury bond rose 8.70 BP to 1.98% [8]. - **Funding Rates**: Bank - to - bank pledged repurchase rates and SHIBOR rates showed different degrees of increase. For example, DR001 rose 6.08 BP to 1.52%, and SHIBOR1M rose 0.90 BP to 1.55% [8]. 2. Graphical Analysis - **Bond Yield Curve Changes**: The report shows the changes in Treasury bond yields at different time points, reflecting the trends in yield curve movements [10][12]. - **Bond Spread Trends**: The report presents the trends of inter - period spreads and inter - variety spreads, such as the 2TF - T and 2TS - T spreads [21]. - **Treasury Bond Term Spread Trends**: The report shows the trends of 5Y - 2Y BP, 10Y - 5Y BP, and 10Y - 2Y BP [25].

Core Viewpoint - The Chinese economy is projected to face increasing pressure on demand due to tariffs, real estate challenges, and limited fiscal capacity, necessitating stronger counter-cyclical policies in the second half of 2025 [1][3]. Economic Growth Contributions - In the first half of the year, final consumption expenditure contributed 52% to GDP growth, capital formation contributed 16.8%, and net exports contributed 31.2% [2]. - The contribution of final consumption expenditure slightly increased to 52.3% in the second quarter, indicating that domestic demand, particularly consumption, is the main driver of GDP growth [2]. Fiscal and Monetary Policy - The focus for the second half of the year will be on reducing reserve requirements and interest rates, expanding domestic demand, and supporting a recovery in the real estate market [3][4]. - The report suggests utilizing public budget funds and considering the issuance of an additional 2.3 trillion yuan in government bonds to meet fiscal spending targets [3]. Consumer Promotion Strategies - There is an urgent need to promote consumption as the U.S. global tariffs may negatively impact Chinese exports, potentially leading to a shift from positive to negative net export contributions [5]. - Proposed measures to boost consumption include issuing long-term special bonds and increasing support for trade-in programs, with a broader scope to include general consumer goods and services [5]. Real Estate Market Recovery - To facilitate a quicker recovery in the real estate market, both demand and supply sides need to be addressed, including potential measures such as relaxing purchase restrictions and providing subsidies for low-income homebuyers [5].

Core Viewpoint - The Chinese foreign exchange market has shown resilience and stability in the first half of 2025, with the RMB appreciating against the USD by 1.9% and maintaining a stable range between 7.15 and 7.35, despite a complex external environment [2][3]. Economic Performance - China's GDP grew by 5.3% year-on-year in the first half of 2025, with domestic demand contributing 77% to economic growth, reflecting an increase of 17 percentage points [4]. - The foreign exchange market's stability is supported by a robust economic foundation and ongoing efforts to expand domestic demand [4]. Foreign Exchange Market Dynamics - In the first half of 2025, there was a bank settlement and sale of foreign exchange deficit of 25.3 billion USD, with a notable shift from deficit to surplus in May and June [2]. - The foreign exchange settlement rate was stable at 60%, while the foreign exchange purchase rate decreased by 3 percentage points to 65% [2]. Market Expectations - The foreign exchange market expectations remain stable, with no significant unilateral appreciation or depreciation of the RMB anticipated [3]. - The RMB exchange rate against the USD was 7.16 at the end of Q2, appreciating slightly from 7.18 at the end of Q1 [3]. Policy and Regulation - The Chinese government is committed to maintaining a balanced international payment structure and promoting high-level opening-up, which is expected to support the stability of the foreign exchange market [4]. - The market has accumulated experience in counter-cyclical regulation, enhancing its ability to respond to external shocks [5]. Risk Management - The awareness of exchange rate risk among enterprises has improved, with the foreign exchange hedging ratio and the proportion of RMB cross-border transactions reaching historical highs of around 30% [5]. - The foreign exchange market has a rich reserve of policy tools and regulatory effectiveness, which enhances its capacity to mitigate external risks [5].

二是以城市更新改造为突破口，扩大政府主导的公共投资。以旧换新政策会随着时间拉长而政策效力递减。在当前制造业产能充裕、产能利用 率不高的环境下，企业设备更新改造的需求不强，进入二季度以后制造业投资增速已经出现了显著下降。比较而言，城市更新改造是为数不多 的现实迫切需要且能够从总体规模上改变宏观局面的发力点。 从结构来看，工业生产保持旺盛，工业增加值增速持续高于GDP增速。出口仍保持韧性，对美国出口虽然明显下降，但是对其他区域仍保持了 较高出口增速。在以旧换新政策支持下，社会零售总额的累计增速较一季度进一步提高，相比之下，固定资产投资较一季度有所走弱。同时， 一季度房地产市场呈现出的企稳迹象再度转为收缩压力，新建住宅销售面积和二手房价格等指标再度走弱。 报告提及，在关税对出口负面影响进一步显现、政府发债和支出力度不及上半年、房地产下跌三重压力下，我国经济下半年仍面临较大需求压 力。而扩大内需仍然是下半年宏观经济政策核心的着力点。 在谈及如何扩大内需时，CF40资深研究员、中国社科院世界经济与政治研究所副所长张斌指出，财政支出是关键，一是要充分运用公共预算 的调入资金及使用结转结余，考虑额外发行2.3万亿政府债券， ...

Economic Performance - China's GDP grew by 5.3% year-on-year in the first half of the year, surpassing the annual target of 5% [1] - The contribution of consumption to economic growth reached 52% in the first half of the year, with total retail sales of consumer goods amounting to 24.55 trillion yuan, a 5% increase year-on-year [4] Consumption Trends - The retail sales growth rate for the catering industry significantly declined from 5.2% in April and 5.9% in May to just 0.9% in June, with the average growth rate for the second quarter at 4.0%, down from 5% in the first quarter [4] - The "old-for-new" policy has positively impacted retail sales, but its effectiveness is expected to diminish over time, necessitating new strategies to boost domestic demand [4][9] Real Estate Market - The real estate market showed signs of weakness in the second quarter, with fixed asset investment growth slowing down and real estate investment declining further, with a year-on-year drop of 11.2% by June [5] - New residential sales area decreased by 3.7% year-on-year in June, indicating a continued downturn in the real estate sector [5] External Economic Factors - Exports to the U.S. fell by 24% in the second quarter, while exports to other regions, such as ASEAN and India, increased by 17.5% and 14.3% respectively [7] - The expiration of the 90-day tariff suspension on August 1 poses additional risks to the economic outlook, with potential new tariffs being implemented by the U.S. [7][8] Future Economic Outlook - Experts suggest that the focus for the second half of the year should be on expanding domestic demand, with fiscal spending being a key driver [9][10] - Recommendations include utilizing public budget funds and considering the issuance of an additional 2.3 trillion yuan in government bonds to support fiscal expenditure growth [9]