Core Viewpoint - The macro leverage ratio in China has risen significantly, reaching 300.4% in Q2 2025, indicating a growing debt burden associated with economic growth [2][3][4]. Group 1: Macro Leverage Ratio Trends - China's macro leverage ratio increased from 298.5% in Q1 2025 to 300.4% in Q2 2025, marking the first time it has exceeded 300% [2]. - By the end of 2024, the macro leverage ratios for China, Germany, Japan, and the U.S. were projected to be 286.5%, 198.6%, 387%, and 249.3% respectively, with China showing the most significant increase [3]. - The rise in China's macro leverage ratio is attributed to the debt growth outpacing nominal GDP growth [3]. Group 2: Sectoral Analysis of Leverage - The leverage ratio of non-financial enterprises in China has shown a pattern of "rise-fall-rise," with a notable increase since 2022, reaching 139.4% by Q3 2024 [4][5]. - In contrast, the leverage ratios of non-financial enterprises in Germany, Japan, and the U.S. have experienced a "rise-fall" trend, with a decline expected by the end of 2024 [4]. - Government leverage in China has increased from 59.6% at the end of 2019 to 88.4% by the end of 2024, while the government leverage ratios in Germany, Japan, and the U.S. have shown a decline after initial increases [5][6]. Group 3: Economic Growth and Debt Relationship - The relationship between economic growth and leverage is highlighted, with the assertion that faster GDP growth could lead to a reduction in government leverage ratios [10]. - Despite China's actual GDP growth outpacing that of the U.S., the nominal GDP growth has been slower, contributing to the rising leverage ratio [11]. - The nominal GDP growth has been hindered by low price levels, which negatively impacts the overall economic growth and leverage dynamics [12]. Group 4: Policy Implications and Recommendations - The need to lower local government leverage has been recognized, with various measures already implemented to address local hidden debts [14]. - Improving the efficiency of policy resource utilization is essential for stabilizing growth and addressing structural economic issues [14][15]. - The focus on enhancing human capital and technological advancement is crucial for improving labor productivity and overall economic performance [16][18].

Group 1 - The global economy in 2025 is characterized by uncertainties, including trade wars, technological transitions, and geopolitical risks, making financial markets a key window for observing macro trends [1] - The recent roundtable discussion at Fudan University focused on the themes of economic and trade competition, technological transitions, and the current international financial situation, aiming to provide academic references for China's capital market in response to new international changes [1][2] - The chief economist from ICBC International highlighted that the global economic recovery cycle is confirmed for 2023-2024, but recent trade wars have caused fluctuations in expectations, with Hong Kong stocks rising nearly 30% in the past three months, outperforming global markets [2] Group 2 - The resilience of the Chinese economy is attributed to its large-scale market and complete industrial system, with a focus on the integration of digital and real economies [3] - The chief economist from Sumitomo Mitsui Banking Corporation emphasized the need for China to manage its relationships with the US and neighboring countries carefully to avoid isolation, suggesting a focus on domestic demand and long-term strategies [3] - The Fudan University professor pointed out that the capital market is crucial for activating property income and addressing the decline in regular income, which is essential for the internationalization of the RMB [4] Group 3 - The discussion highlighted the importance of capital markets in supporting early-stage financing for technology companies and accelerating breakthroughs in advanced technology fields [5] - Experts agreed that the global economic recovery is subject to fluctuations, but China's manufacturing advantages and technological potential provide resilience against challenges [6] - The need for China to be cautious of deflation and geopolitical risks was emphasized, advocating for counter-cyclical policies and technological breakthroughs to achieve quality growth [6]

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].