Economic Overview - In the first half of 2025, China's GDP grew by 5.3% year-on-year, ranking among the top major economies globally [1] - The per capita disposable income for residents reached 21,840 yuan, also reflecting a nominal growth of 5.3% compared to the same period last year [1] - The Consumer Price Index (CPI) showed a slight decline of 0.1% year-on-year, indicating a stable yet decreasing trend in domestic prices [1] Real Estate Market Changes - The real estate market continued to experience a decline in both volume and price, with new residential sales area down by 3.5% and sales value down by 5.5% in the first half of 2025 [5] - A significant change in housing prices is expected, with a divergence in price trends across different cities; cities with previously larger declines may see a slowdown, while major cities like Shanghai and Shenzhen may face further price drops [5] - The pre-sale system for commercial housing is anticipated to be gradually abolished, with an increase in the proportion of completed homes for sale, allowing buyers to view properties before purchasing [7] - The government plans to accelerate the market entry of affordable housing, aiming to provide 6 million units over the next five years, which will likely reduce costs for buyers and exert downward pressure on market prices [7] Automotive Market Dynamics - The automotive market is experiencing a price reduction trend, with many brands reducing prices by 20,000 to 30,000 yuan for mid-range vehicles and up to 90,000 yuan for luxury cars [9] - Factors contributing to this price reduction include an influx of new energy vehicles, increased competition from tech companies entering the automotive sector, and a decline in demand due to reduced middle-class incomes [9] Banking and Savings Landscape - Concerns are rising that holding cash may become less valuable due to excessive money supply, with M2 reaching 326 trillion yuan, over twice the GDP of 2024 [11] - Despite a slight decline in CPI, the economy is currently experiencing deflation rather than inflation, as excess money is not circulating into the economy [11] - Although deposit rates have fallen to historic lows, further declines are expected to be limited, as extremely low rates may lead to significant withdrawals from banks, increasing financing difficulties [13]

Summary of Conference Call Notes Industry Overview - The discussion revolves around the **supply-side reform** in China, specifically the **Supply-Side Reform 2.0** and its implications for various industries, particularly in the context of **overcapacity** and **deflation** [1][4][10]. Key Points and Arguments 1. **Return of "Anti-Involution"**: The term "involution" has gained traction in recent years, with the government emphasizing the need to combat it. This reflects a shift in policy focus towards sustainable growth and social welfare [2][10]. 2. **Complex Current Environment**: The current economic landscape is more complicated than the previous supply-side reforms (2015-2018). The overcapacity issue is exacerbated by a more challenging industry structure and macroeconomic environment [1][4][10]. 3. **Differences from Previous Reforms**: - **Target Industries**: The previous reforms primarily targeted upstream industries, while the current focus is on midstream and downstream sectors [5]. - **Enterprise Types**: The earlier reforms were dominated by state-owned enterprises (SOEs), whereas the current situation sees a predominance of private enterprises [5]. - **Execution Methods**: The previous reforms relied heavily on administrative orders, while the current approach is expected to be more balanced and flexible [5]. 4. **Limited Backward Capacity**: The current overcapacity is largely in advanced production capacities developed in recent years, making it difficult to identify clear targets for shutdowns [8][10]. 5. **Economic Weakness and Fiscal Constraints**: The economic downturn and high government debt (over 100% of GDP) limit the government's ability to implement expansive fiscal policies, which are crucial for stimulating demand [8][10]. 6. **Historical Context**: The success of the previous supply-side reforms was attributed to clear directives from the central government and the dominant role of SOEs in key industries [9][10]. 7. **Need for Demand Stimulation**: The report emphasizes that demand stimulation is critical to mitigate the negative impacts of supply-side adjustments, as significant production cuts could lead to job losses and reduced overall demand [9][10]. 8. **Policy Implementation Challenges**: Despite recent meetings to discuss "anti-involution" measures, there is still no clear timeline or actionable plan, indicating the complexity of implementing these reforms [10][11]. 9. **Potential for Future Reforms**: The report suggests that while the direction of the "anti-involution" policy is correct, the tools available for implementation are more limited compared to previous reforms, and the affected industries are broader [13]. Other Important Insights - **Sector-Specific Analysis**: - In the **photovoltaic industry**, there are concerns about potential demand declines and high inventory levels, complicating the path for production cuts [12]. - In the **express delivery sector**, companies have not yet changed their pricing and competition strategies, indicating a potential for varied outcomes based on different production cut policies [12]. - In the **upstream materials sector**, the enforcement of renewable energy consumption responsibilities may influence capacity exits, but flexibility remains in execution [12]. - **Conclusion on Inflation**: The report concludes that rapid re-inflation is contingent on demand improvement, and the current economic conditions suggest a slow re-inflation process, with expectations of continued deflation into late 2026 [13].

Summary of Key Points from the Conference Call Industry Overview - **Industry**: Chinese Economy - **Focus**: Addressing deflation challenges and overcapacity through anti-involution policies Core Insights and Arguments 1. **Deflation Challenges**: China has faced deflation for nine consecutive quarters, with the GDP deflator remaining negative and the Producer Price Index (PPI) in deflation for 33 months. This situation is attributed to overcapacity in the context of high investment-to-GDP ratios [7][8][32] 2. **Policy Response**: The government is expected to intensify policy measures to combat overcapacity, with a focus on demand-side solutions rather than solely supply-side adjustments. Historical comparisons are made to the 2015-16 supply-side reforms that helped the economy recover from deflation [7][9][10] 3. **Investment Dynamics**: The report highlights that the current economic strategy relies heavily on manufacturing and infrastructure investments to maintain GDP growth, especially in light of the structural slowdown in the real estate sector [8][15][31] 4. **Private Sector Role**: A significant portion of overcapacity is found in emerging industries, with 50-90% of capacity in the private sector. This complicates the management of supply-side reforms [7][44] 5. **Need for Demand Support**: The report emphasizes that merely reducing supply will not suffice; boosting demand through social welfare spending and consumption support is crucial for sustainable economic recovery [10][42] Additional Important Insights 1. **Historical Context**: The report draws parallels between the current economic situation and past deflationary periods, noting that previous recoveries were driven by strong external demand and real estate market rebounds, which are currently lacking [11][41] 2. **Population Dynamics**: The declining population and structural issues in the real estate market are expected to hinder future economic growth and complicate demand management [23][26] 3. **Sector-Specific Overcapacity**: The report identifies specific sectors, such as solar energy and electric vehicles, where supply significantly exceeds demand, complicating efforts to manage overcapacity [45][48] 4. **Long-Term Growth Strategy**: A shift in growth strategy is suggested, moving from investment-driven growth to a more balanced approach that includes consumption as a key driver [42][46] Conclusion - The report outlines a complex landscape for the Chinese economy, where addressing deflation and overcapacity requires a multifaceted approach that includes both supply-side reforms and demand stimulation. The historical context and current challenges highlight the need for a strategic shift in economic policy to ensure sustainable growth moving forward [42][50]

Macro Strategy - The significance of the Sci-Tech Innovation Board (STAR Market) reform is highlighted, emphasizing its role in supporting the development of "hard technology" enterprises through a registration-based system [1][7] - The STAR Market has become a hub for domestic "hard technology" companies, with ongoing reforms aimed at enhancing innovation, improving standards, and expanding channels for new productive forces [1][7] - The reform facilitates financing for unprofitable enterprises and guides capital towards hard technology sectors, promoting a shift towards "long-term value" in the capital market [1][7] Fixed Income Analysis - The report discusses the phenomenon of "deflation," characterized by a continuous decline in prices and economic recession, with significant implications for monetary policy [2][8] - In the first half of 2025, China's CPI showed a slight decline of -0.07%, while PPI remained in negative territory at an average of -2.77% [2][8] - Key factors affecting CPI include food prices and transportation costs, with food contributing an average of -0.24 percentage points to CPI [2][8] Industry Insights Ruixinwei (603893) - Ruixinwei is a leading player in the AIoT SoC chip sector, leveraging over 20 years of experience in integrated circuit design to innovate across various applications [4][9] - The company reported a record revenue in 2024, with a net profit of 595 million yuan, driven by strong demand for smart application processors [4][9] - Ruixinwei's strategic focus includes automotive electronics, with significant advancements in smart cockpit and vehicle audio solutions [4][9] Zhongke Lanyun (688332) - Zhongke Lanyun specializes in wireless audio SoC chips, with a diverse product line that includes Bluetooth earphone and speaker chips [5][10] - The TWS market is experiencing a revival, driven by new demands in office and gaming scenarios, as well as growth in emerging markets [5][10] - The company is expanding its product offerings to include Wi-Fi and video chips, aiming to enhance its market presence [5][10]

Report Industry Investment Rating No relevant content provided. Core Views of the Report - Affected by expectations and emotions, the bond market tumbled this week. The official unveiling of a super hydropower project drove up resource stocks, with the A-share market reaching 3,600 points, suppressing the bond market. The introduction of anti-involution policies led to the limit-up of multiple commodity futures prices, reducing investors' concerns about deflation [1][4][12][35]. - As of July 25, the spread between 30-year and 10-year treasury bonds was 24BP, at a historically low level. The spread between 20-year China Development Bank bonds and 20-year treasury bonds was 2BP, at a historically extremely low position. Although the stock market's strength suppresses bond market sentiment, the domestic economy still faces downward pressure, and the fundamentals supporting the bond market have not yet shown an inflection point. The actual effect of "anti-involution" remains to be tested. The risk of 10-year treasury bonds above 1.7% has been initially released, but the term spread and variety spread protection for 30-year treasury bonds and 20-year China Development Bank bonds are limited [2][3][13][14]. Summary by Relevant Catalogs Weekly Review Ultra-long Bond Review - Affected by expectations and emotions, the bond market tumbled this week. The super hydropower project and anti-involution policies influenced the market. Last week, ultra-long bond trading activity increased significantly, and the term spread widened while the variety spread narrowed [1][4][12]. Ultra-long Bond Investment Outlook - **30-year Treasury Bonds**: As of July 25, the 30-year - 10-year treasury bond spread was 24BP, historically low. In June, the domestic economy showed resilience but weak domestic demand. GDP grew about 5.2% year-on-year, up 0.1% from May, still above the annual target, but the growth rates of social consumption and investment declined. CPI was 0.1%, PPI -3.6%, with deflation risks. The stock market suppresses bond sentiment, but the economic downward pressure persists, and the "anti-involution" effect is uncertain. The risk of 10-year treasury bonds above 1.7% has been initially released, but the term spread protection is limited [2][13]. - **20-year China Development Bank Bonds**: As of July 25, the 20-year CDB - 20-year treasury bond spread was 2BP, historically extremely low. The economic situation in June was similar to that of 30-year treasury bonds. The stock market suppresses bond sentiment, the economic downward pressure remains, and the "anti-involution" effect is uncertain. The risk of 10-year treasury bonds above 1.7% has been initially released, but the variety spread protection is limited [3][14]. Ultra-long Bond Basic Overview - The balance of outstanding ultra-long bonds exceeded 22.2 trillion. As of June 30, the total amount of ultra-long bonds with a remaining term of over 14 years was 222,528 billion, accounting for 14.5% of all bonds. Local government bonds and treasury bonds were the main varieties. By remaining term, the 30-year variety had the highest proportion [15]. Primary Market Weekly Issuance - Last week (July 7 - 11, 2025), the issuance of ultra-long bonds increased slightly, totaling 2,950 billion yuan. By variety, treasury bonds were 830 billion, local government bonds 1,810 billion, etc. By term, 15-year bonds were 618 billion, 20-year bonds 744 billion, and 30-year bonds 1,588 billion [20]. This Week's Planned Issuance - The announced issuance plan for ultra-long bonds this week totals 1,719 billion yuan, including 350 billion in ultra-long treasury bonds, 1,262 billion in ultra-long local government bonds, etc. [26]. Secondary Market Trading Volume - Last week, ultra-long bond trading was very active, with a turnover of 14,782 billion yuan, accounting for 15.0% of all bond turnover. By variety, ultra-long treasury bonds had a turnover of 11,654 billion yuan, ultra-long local bonds 2,541 billion yuan, etc. Compared with the previous week, trading activity increased significantly [28]. Yield - Affected by expectations and emotions, the bond market tumbled this week. The yields of various ultra-long bonds changed. For example, the yields of 15-year, 20-year, 30-year, and 50-year treasury bonds changed by 6BP, 9BP, 8BP, and 7BP to 1.87%, 1.99%, 1.97%, and 2.02% respectively [35]. Spread Analysis - **Term Spread**: Last week, the ultra-long bond term spread widened, but the absolute level was low. The 30-year - 10-year treasury bond spread was 24BP, up 2BP from the previous week, at the 8% percentile since 2010 [47]. - **Variety Spread**: Last week, the ultra-long bond variety spread narrowed, and the absolute level was low. The spreads between 20-year China Development Bank bonds and treasury bonds, and 20-year railway bonds and treasury bonds were 2BP and 6BP respectively, down 2BP and 1BP from the previous week, at the 3% percentile since 2010 [50]. 30-year Treasury Bond Futures - Last week, the main 30-year treasury bond futures variety TL2509 closed at 117.95 yuan, a decline of 2.08%. The total trading volume was 781,200 lots (342,890 lots), and the open interest was 160,200 lots (10,208 lots). The trading volume increased significantly compared with the previous week, and the open interest increased slightly [52].

Report Industry Investment Rating No relevant content provided. Core Viewpoints -受预期和情绪影响，本周债市暴跌，一是超级水电站项目揭牌带动资源股暴涨，A股站上3600点压制债市，二是反内卷政策出台使投资者对通缩担忧下降 [1][4][12][35] -当前国内经济有下行压力，债市基本面未现拐点，“反内卷”效果待检验，1.7%以上的10年期国债风险初步释放，但30年国债期限利差和20年国开债品种利差偏低，保护度有限 [2][3][13][14] Summary by Relevant Catalogs Weekly Review Ultra-long Bond Review -本周债市因预期和情绪暴跌，超级水电站项目和反内卷政策影响市场 [1][4][12] -上周超长债交投活跃度大幅上升，期限利差走阔、品种利差缩窄 [1][4][12] Ultra-long Bond Investment Outlook -30年国债：截至7月25日，30年与10年国债利差24BP，处于历史偏低水平，经济有韧性但内需弱，通缩风险依存 [2][13] -20年国开债：截至7月25日，20年国开债与国债利差2BP，处于历史极低位置，经济情况与30年国债类似 [3][14] Ultra-long Bond Basic Overview -截至6月30日，剩余期限超14年的超长债余额22.2528万亿，占全部债券余额14.5%，地方政府债和国债是主要品种 [15] -按品种，国债、地方政府债等各有占比；按剩余期限，25 - 35年品种占比最高 [15] Primary Market Weekly Issuance -上周（2025.7.7 - 2025.7.11）超长债发行量小幅增加，共发行2950亿元 [20] -分品种和期限，各有不同发行量 [20] This Week's Scheduled Issuance -本周已公布超长债发行计划共1719亿，涉及多种债券品种 [26] Secondary Market Trading Volume -上周超长债交投活跃，成交额14782亿，占比15.0%，各品种成交额及占比有差异 [28] -与上上周相比，超长债交投活跃度大幅上升，各品种成交额和占比均增加 [28] Yield -本周债市暴跌，各期限国债、国开债、地方债、铁道债收益率有变动 [35] -代表性个券中，30年国债活跃券和20年国开债活跃券收益率有变动 [36] Spread Analysis -期限利差：上周超长债期限利差走阔，绝对水平偏低，30年 - 10年国债利差24BP，较上上周变动2BP [47] -品种利差：上周超长债品种利差缩窄，绝对水平偏低，20年国开债和国债利差、20年铁道债和国债利差分较上上周变动 - 2BP和 - 1BP [50] 30-Year Treasury Bond Futures -上周30年国债期货主力品种TL2509收117.95元，增幅 - 2.08%，成交量大幅上升、持仓量小幅上升 [52]

Group 1 - The European Central Bank (ECB) has decided to maintain interest rates unchanged, with the main rate at 2% and the deposit rate at 2.15%, indicating a pause in rate cuts for the time being [1][3] - ECB President Christine Lagarde stated that the economic situation in the Eurozone is stable, with the cost of living crisis considered over, and emphasized the need to focus on future developments [3] - The ECB has lowered rates eight times in the past nine months from a peak of 4%, and is currently monitoring the impact of increased tariffs on EU exports from the US [3] Group 2 - The ECB forecasts that inflation will stabilize at 2% in the medium term, with wage growth expected to slow from 4.5% last year to 3.3% this year and 2.8% by 2026 [3] - BCA Research's chief strategist suggested that the ECB's July decision may be a pause before significant rate cuts in future meetings to prevent economic stagnation and avoid deflation [3]

北京时间7月24日晚，欧洲央行公布最新利率决议，决定将存款机制利率、主要再融资利率以及边际贷 款利率维持现有水平不变，三大关键利率分别为2%、2.15%、2.4%。欧洲央行在通过八次下调，将政策 利率降低200个基点后，降息周期或已接近终点。 欧洲央行此举符合金融市场此前普遍预期，欧洲央行通过暂停降息，既避免过度刺激可能引发的通胀反 弹，又为应对贸易冲击保留了政策空间。当日货币会议释放出欧洲央行更为谨慎的信号，显示欧洲央行 政策层目前更倾向于等待局势明朗后再行决策。但多数市场人士认为欧洲央行年内仍可能再次尝试降 息，但具体时机将高度依赖数据表现。 当前利率水平为政策观望提供空间 欧洲央行在当天发布的声明中表示，目前通胀率已实现2%的中期目标。当前物价压力持续缓解，欧洲 央行仍致力确保通胀率在中期内稳定在2%的目标水平。 据欧盟统计局的最新数据，欧元区通胀率已降至2%，能源价格下跌成为关键因素，核心通胀为2.3%。 这表明，欧洲央行的政策目标阶段性得以实现。 此外，欧元区工资增速放缓，欧元区经济在全球复杂环境下表现出一定韧性，表明前期政策调整已部分 传导至实体经济，一定程度反映出此前的降息效果。 不过，东方金诚 ...

Macro Strategy - The report concludes that China's service sector employment and wage levels are not low compared to 43 economies, but there are three areas for improvement: the employment share in the service sector is still low compared to high-income economies, particularly in health and social work and real estate; the construction sector's employment is close to saturation, while the real estate sector has room for growth; and there is a significant income disparity across different service industries, with telecommunications and finance having higher wages compared to education and real estate [4][5][6]. Fixed Income Analysis - The report discusses the phenomenon of "deflation," characterized by a continuous decline in money supply and prices, leading to economic recession. It highlights that the main causes of deflation include supply-demand imbalances and a decrease in nominal money supply or circulation speed. Historical examples from Japan and the US illustrate how these countries responded to deflation through fiscal expansion and monetary easing [7][8]. - As of the first half of 2025, China's CPI showed a slight decline, averaging -0.07%, while PPI remained in negative territory, averaging -2.77%. The report attributes the low CPI to declines in food and transportation costs, while PPI is affected by weak real estate and infrastructure investment [7][8]. Company Analysis - 聚星科技 (Juxing Technology) is identified as a "small giant" in the electrical contact products sector, with a strong focus on technological innovation. The company was established in November 1996 and went public on the Beijing Stock Exchange in November 2024, becoming the first company from Wenzhou to list there. In 2024, it achieved a net profit of 116 million yuan, a year-on-year increase of 51.12%, and in Q1 2025, the net profit was 23 million yuan, up 44.97% year-on-year [2][10]. - The electrical contact products industry is expanding, with a compound annual growth rate of 10.98% from 2015 to 2023. The low-voltage electrical equipment market is also growing, driven by increasing fixed asset investments and rising demand in household appliances and industrial control sectors [10]. - 聚星科技 emphasizes core product focus and technological innovation, holding a competitive gross margin compared to peers. The company has established strong relationships with major low-voltage electrical manufacturers, enhancing customer loyalty [10]. - The report forecasts that the company's net profit will reach 130 million, 158 million, and 194 million yuan in 2025, 2026, and 2027, respectively, reflecting year-on-year growth rates of 12%, 21%, and 23%. The company is rated as "overweight" due to its strong growth potential and sufficient production capacity [3][10].

Group 1: Macro Strategy Insights - In Q2 2025, the overall scale of fixed income + funds saw net subscriptions, with significant growth in primary and secondary bond funds, while convertible bond fund scale decreased noticeably [1][10] - The asset allocation of fixed income + funds showed a reduction in equity positions, increasing allocations to bonds and cash, with flexible allocation funds increasing stock and convertible bond positions [1][10] - The overall position of public funds in convertible bonds slightly decreased by 0.08 percentage points, while fixed income + funds saw a decline of 0.54 percentage points, with only convertible bond funds increasing by 0.77 percentage points [1][10] Group 2: Industry Analysis - The report highlights that the company Daikin Heavy Industries secured a significant order for a European expansion project, enhancing earnings certainty with a total price of 430 million RMB, expected to be delivered in 2026 [5][12] - For Xiamen Tungsten Co., the half-year performance report for 2025 showed a revenue of 7.53 billion RMB, a year-on-year increase of 18%, and a net profit of 310 million RMB, up 28% [6][13] - Meitu Inc. reported a strong performance in H1 2025, with an expected net profit growth of no less than 30%, driven by increased user subscriptions in its core imaging and design products [7][14] Group 3: Company-Specific Insights - Feilong Co. reported H1 2025 revenue of 2.162 billion RMB, a year-on-year decrease of 8.7%, but a net profit increase of 14.5%, indicating improved profitability [8][15] - The report indicates that the company is focusing on expanding its international presence, particularly in Southeast Asia, with a new production base in Thailand expected to enhance global business scale [8][15] - The report maintains profit forecasts for the company, projecting net profits of 455 million, 631 million, and 789 million RMB for 2025-2027, corresponding to PE ratios of 20, 14, and 12 times [8][15]