Report Industry Investment Rating No relevant content provided. Core Viewpoints of the Report - In the first half of the year, fiscal expenditure was front - loaded, while fiscal revenue was weak. The general budget fiscal deficit increased year - on - year, and the broad fiscal deficit rate was at a relatively high level. In June, the growth rates of general public budget revenue and expenditure both declined, while those of government - funded revenue and expenditure increased significantly. In the second half of the year, the intensity of fiscal expenditure is expected to decline, and policy - based financial instruments are expected to be introduced in the third quarter, while other incremental fiscal policies may need to wait [1][3][4][5]. Summary by Directory 1. First - half Fiscal Operation - **Revenue and Expenditure Growth**: From January to June, the cumulative year - on - year growth rate of broad fiscal revenue was - 0.6%, remaining negative. The year - on - year growth rate of broad fiscal expenditure was 8.9%, indicating front - loaded expenditure. In June, the year - on - year growth rates of broad fiscal revenue and expenditure were 2.8% and 17.6% respectively, showing marginal improvement [9]. - **Budget Completion**: Compared with the annual budget, the revenue side fell short of expectations. The cumulative year - on - year growth rate of general public budget revenue was - 0.3% (the annual budget was + 0.1%), mainly due to the actual - 1.2% growth of tax revenue (the annual budget was + 3.7%) and the 3.7% growth of non - tax revenue (the annual budget was - 14.2%). The cumulative year - on - year growth rate of government bond fund revenue was - 2.4%, and it was still challenging to achieve the 0.7% annual budget growth. On the expenditure side, the growth rate of fiscal expenditure was 3.4%, slightly lower than the 4.4% annual budget growth. The growth rate of government - funded expenditure was 30%, slightly lower than the 23.1% annual budget growth, and its sustainability needs further observation [1][11]. - **Deficit and Debt**: The general budget fiscal deficit in the first half of the year was 2.57 trillion yuan, a year - on - year increase of about 0.5 trillion yuan. Assuming a 4% nominal GDP growth this year, the cumulative broad fiscal deficit rate from January to June was 3.7%, at a relatively high level compared with previous years, similar to 2022, indicating strong support from debt income for fiscal expenditure. The issuance of general treasury bonds, replacement special bonds, and special treasury bonds was front - loaded, and the issuance of special bonds was neutral with an accelerating trend since the end of June [1][2][15]. 2. June Fiscal Data Review - **Revenue Side**: In June, the year - on - year growth rate of general public budget revenue turned negative (- 0.3%), but the structure improved. Tax revenue increased by 1.0% year - on - year, and non - tax revenue decreased by 3.7% year - on - year. Among taxes, personal income tax, domestic VAT, and securities trading stamp duty had relatively high growth rates. The year - on - year growth rate of government - funded revenue was 20.8%, a significant improvement, but its sustainability may be weak due to the continued weak growth of real estate investment [3][22][27]. - **Expenditure Side**: The expenditure intensity of the general public budget decreased, with a year - on - year growth rate of 0.38%. The year - on - year growth rate of government - funded expenditure increased significantly to 79.2%, mainly due to the improvement of government - funded revenue in June and the impact of the issuance of special treasury bonds since April. Structurally, traditional infrastructure expenditure continued to contract, while expenditure on science and technology and social security had relatively high growth rates [3][30]. 3. Outlook for the Second - half Fiscal Situation - **Expenditure Intensity**: The intensity of fiscal expenditure is expected to decline in the second half of the year. The net financing scale of government bonds is expected to decrease. It is estimated that the net financing of local bonds in the third and fourth quarters will be 1.7 trillion yuan and 537.4 billion yuan respectively, and that of treasury bonds will be 1.6 trillion yuan and 1.7 trillion yuan respectively. The net financing of government bonds in the third and fourth quarters will be 3.3 trillion yuan and 2.2 trillion yuan respectively, with a significant year - on - year decrease, which may drag down the year - on - year growth of fiscal expenditure. In addition, the scale of special bonds for project expenditure is also expected to decline in the second half of the year [4][34]. - **Policy Expectations**: The third quarter may enter a policy observation period. Policy - based financial instruments are expected to be introduced, but the timing is uncertain. Other incremental fiscal policies may need to wait until after the introduction of policy - based financial instruments or when the domestic economy weakens [5][41].

Revenue Insights - In the first half of 2025, general fiscal revenue totaled 11.56 trillion, down 0.3% year-on-year, with June revenue at 1.89 trillion, also down 0.31% year-on-year[1][2] - Government fund revenue in June was 395.9 billion, a significant increase of 20.8% year-on-year, driven mainly by land transfer income[9][10] Expenditure Trends - Total general fiscal expenditure in the first half reached 14.13 trillion, up 3.4% year-on-year, with June expenditure at 2.83 trillion, a mere 0.38% increase year-on-year[1][2] - Central fiscal expenditure grew by 9% year-on-year, significantly outpacing local expenditure growth of 2.6%[2][8] Economic Outlook - The GDP growth rate for the first half of 2025 was 5.3%, suggesting a potential slowdown to around 4.7% in the second half, still maintaining a target of "around 5%"[4][5] - New policies are expected from the Political Bureau by the end of July, but strong stimulus measures are unlikely, with a focus on gradual support[4][5] Fiscal Policy Considerations - The fiscal policy approach is expected to be a "two-step" process, focusing first on the implementation of existing policies and then adjusting based on economic conditions[5][6] - Key areas of focus include the pace of government bond issuance and the actual progress of physical work projects[5][6]

Group 1: Report Overview - Report Title: Treasury Bond Derivatives Weekly Report [1] - Report Date: July 25, 2025 [1] - Author: Xu Liang Z0002220 [2] - Reviewer: Tang Yun Z0002422 [2] Group 2: Market Analysis Bullish Factors - The central bank maintains ample liquidity, with a net capital injection of over one trillion yuan in the past week, leading to a decline in capital interest rates and supporting the bond market [3] Bearish Factors - Economic data shows marginal improvement, with industrial added - value in June exceeding expectations. The fundamental recovery is negative for the bond market [3] - Fiscal policy and anti - involution regulation are strengthened, increasing policy - related bearish pressure [3] Trading Advisory View - Treasury bond futures will continue to show a volatile trend, with no obvious trend - based opportunities. It is recommended that both long and short positions wait and see [3] Group 3: Market Data Treasury Bond Yields - The report presents the trends of 2Y, 5Y, 10Y, 30Y, and 7Y treasury bond yields from April 2024 to April 2025 [4] Capital Interest Rates - It shows the trends of the weighted average interest rate of pledged repurchase of deposit - taking institutions for 1 - day and 7 - day terms, as well as the 7 - day reverse repurchase rate from August 2023 to April 2025 [4] Treasury Bond Term Spreads - The trends of 7Y - 2Y and 30Y - 7Y treasury bond term spreads from April 2024 to April 2025 are presented [5] Treasury Bond Futures - **Open Interest**: The open interest trends of 2 - year, 5 - year, 10 - year, and 30 - year treasury bond futures from December 2015 to December 2023 are shown [7] - **Trading Volume**: The trading volume trends of 2 - year, 5 - year, 10 - year, and 30 - year treasury bond futures from April 2024 to April 2025 are presented [8] Basis and Spread - **Basis**: The basis trends of 2 - year, 5 - year, 10 - year, and 30 - year treasury bond futures' current - quarter contracts are shown [9][10][11][14] - **Inter - delivery Spread**: The inter - delivery spreads (current - quarter minus next - quarter) of 2 - year, 5 - year, 10 - year, and 30 - year treasury bond futures are presented [16][17][18] - **Cross - product Spread**: The cross - product spreads of TS*4 - T and T*3 - TL are shown [19][20]

Revenue Analysis - In the first half of 2025, the national general public budget revenue was 1,155.66 billion yuan, a year-on-year decrease of 0.3%[2] - Tax revenue amounted to 929.15 billion yuan, down 1.2% year-on-year, while non-tax revenue increased by 3.7% to 226.51 billion yuan[2] - In June, the general public budget revenue showed a monthly year-on-year decline of 0.3%, compared to a previous value of 0.1%[3] Expenditure Insights - Total general public budget expenditure reached 1,412.71 billion yuan in the first half, reflecting a year-on-year growth of 3.4%[2] - Central government expenditure was 199.14 billion yuan, up 9%, while local government expenditure grew by 2.6% to 1,213.57 billion yuan[2] - In June, general public expenditure increased by only 0.4% year-on-year, marking the slowest growth since 2019[3][14] Fund Budget Performance - Government fund budget revenue surged by 20.8% in June, primarily driven by a 21.9% increase in land transfer income[4] - Government fund expenditure in June skyrocketed by 79.2%, with land-related expenditures rising to 5.9%[4] - For the first half of the year, the second budget's revenue decreased by 2.4%, while expenditure grew by 30%[4] Overall Fiscal Trends - The broad fiscal expenditure growth rate was significantly up at 17.6% in June, compared to 4% previously[5] - Broad fiscal revenue showed a year-on-year increase of 2.8% in June, reversing a previous decline of 1.2%[5] - Year-to-date, broad fiscal revenue has decreased by 0.6%, with a completion rate of 47.8%[5]

Group 1 - The city's general public budget revenue for 2024 is projected to grow by 3.1%, with a focus on supporting key areas such as technology innovation and manufacturing through tax reductions and refunds exceeding 150 billion yuan [1][2] - In 2023, the city's general public budget revenue reached 637.27 billion yuan, marking a 3.1% increase, with tax revenue accounting for 85.9% of total fiscal income, maintaining the highest quality nationwide [1] - Total public budget expenditure for the city reached 839.65 billion yuan in 2023, an increase of 5.3%, with a focus on essential services including education, employment, social security, healthcare, and elderly care [1][2] Group 2 - The government issued 121.6 billion yuan in new bonds to support major projects in housing renovation and transportation infrastructure, and introduced project capital funding for new infrastructure projects [2] - The average guarantee fee rate for small and micro enterprises has been reduced to below 1%, with over 330 technology innovation guarantee businesses established, amounting to financing exceeding 500 million yuan [2] - The city has implemented policies to lower unemployment insurance rates and has created 299,000 new urban jobs, while also enhancing the social security system by raising the minimum living standard to 1,450 yuan per month [2]

Core Insights - The overall fiscal performance in China for the first half of 2025 shows a slight decline in public budget revenue and an increase in expenditure, indicating a stable fiscal environment despite economic pressures [1][2]. Revenue Summary - Total public budget revenue reached 115,566 billion yuan, a year-on-year decrease of 0.3% [2]. - Tax revenue amounted to 92,915 billion yuan, down 1.2% year-on-year, while non-tax revenue increased by 3.7% to 22,651 billion yuan [2]. - Central government revenue was 48,589 billion yuan, a decline of 2.8%, while local government revenue rose by 1.6% to 66,977 billion yuan [2]. - Monthly tax revenue has shown a recovery since April, with growth rates of 1.9% in April, 0.6% in May, and 1% in June [2]. Expenditure Summary - Total public budget expenditure was 141,271 billion yuan, reflecting a year-on-year increase of 3.4% [4]. - Central government expenditure grew by 9% to 19,914 billion yuan, while local government expenditure increased by 2.6% to 121,357 billion yuan [4]. - Key areas of expenditure included social security and employment (up 9.2%), education (up 5.9%), and science and technology (up 9.1%), while spending on urban and rural communities, agriculture, and transportation saw declines [4]. Future Outlook - Analysts expect favorable conditions for fiscal revenue in the second half of the year, driven by policies aimed at economic recovery and infrastructure investment [3]. - The introduction of new policy financial tools is anticipated to accelerate infrastructure recovery, benefiting sectors with significant accounts receivable [3]. - The government has substantial room for borrowing, with manageable debt levels and a large deficit space compared to international standards [3]. Key Areas of Focus - The government issued 26,000 billion yuan in new local government bonds to support major projects in the first half of the year [4]. - The upcoming "15th Five-Year Plan" will focus on tax system reforms, which may include adjustments to consumption tax collection and local government incentives to improve the consumption environment [5].

Core Viewpoint - The article emphasizes the importance of enhancing the effectiveness of fiscal policy through better coordination with other policies, aiming to create a synergistic effect that amplifies the impact of policy measures [1] Group 1: Policy Coordination - Strengthening the collaboration between fiscal policy and monetary, employment, industrial, and regional policies is essential to form a cohesive approach that maximizes policy effects [1] - The need for a comprehensive strategy that aligns the formulation and execution of fiscal policy with other policies throughout the entire process is highlighted [1] Group 2: Implementation and Communication - It is crucial for relevant departments at all levels to improve communication and coordination to accurately understand policy intentions and implement targeted measures [1] - Ensuring effective execution of policies from the initial stages of formulation to the final stages of implementation is necessary for achieving desired outcomes [1]

Group 1 - The core viewpoint emphasizes the significant role of fiscal policy in macroeconomic regulation, particularly in the context of a sluggish global economic recovery, highlighting its importance in stabilizing the economy [1][2] - In the first half of the year, national general public budget expenditure exceeded 14 trillion yuan, a year-on-year increase of 3.4%, with social security and employment expenditure reaching 2.4504 trillion yuan, up 9.2% year-on-year [1] - The fiscal policy has shifted from "active" to "more active," with increased intensity and scale, including over 2 trillion yuan in new local government special bonds issued and 162 billion yuan allocated for long-term special government bond funds to promote consumption [1] Group 2 - There is a strong emphasis on enhancing support for education and technology, with expenditures in these areas growing by 5.9% and 9.1% year-on-year, respectively [2] - The fiscal policy aims to focus on weak areas and key links in economic and social development, optimizing fiscal policy supply to provide substantial financial and policy support for high-quality development [2] - The effectiveness of fiscal policy will be enhanced through better coordination with monetary, employment, industrial, and regional policies, ensuring a cohesive approach to policy implementation [2]

Group 1 - The Chinese government is implementing a more proactive fiscal policy this year, with an expanded toolbox and increased intensity to support economic growth [1][2] - The consumption upgrade policy, including subsidies for replacing old consumer goods, has led to a significant increase in sales, with a reported 20% growth in sales at a mobile phone store in Liaoning Province [2][3] - As of July 22, 2023, the consumption subsidy program in Liaoning has reached 110 million yuan, directly stimulating consumption by 630 million yuan [2] Group 2 - The government has allocated 300 billion yuan in special bonds to support the consumption upgrade policy, an increase of 150 billion yuan from the previous year [2] - In the first half of the year, over 66 million consumers participated in the replacement program for 12 categories of home appliances, with a total of over 10.9 million units replaced [2] - The total retail sales of consumer goods increased by 5% year-on-year in the first half of 2023, indicating a positive trend in consumption recovery [2][8] Group 3 - The Guangdong Shantou International Textile City project received 190 million yuan in local government special bond funding, facilitating its infrastructure development [3] - The scale of government bond issuance has significantly increased this year, with a doubling of funds for the consumption upgrade policy compared to last year [3] - The measures aimed at boosting consumption are expected to have a positive impact on economic growth, as noted by various economic analysts [3] Group 4 - The government has allocated 200 billion yuan in special bonds for equipment upgrades, an increase of 50 billion yuan from the previous year, to encourage technological advancement [4] - In the first half of the year, 173 billion yuan has been disbursed to approximately 7,500 projects, enhancing production efficiency and reducing costs [4] - The introduction of advanced equipment has led to a 10% reduction in production costs and a doubling of production efficiency for companies like Chongqing Shundoli Locomotive Co., Ltd. [4] Group 5 - Tax and fee reduction policies have saved companies over 6.36 billion yuan in the first five months of the year, directly benefiting operational entities [5] - The Shandong Province New Momentum Fund has invested over 30 billion yuan in more than 390 projects in digital economy and artificial intelligence sectors [5] - The government is utilizing investment funds as a key tool to support industrial development and technological innovation [5] Group 6 - Various fiscal policy tools, including government investment funds and tax incentives, are effectively promoting economic transformation and innovation [6] - The focus on key areas such as technology and talent development is driving the growth of new productive forces in the economy [6] Group 7 - In the first half of 2023, social security and employment expenditures reached 2.4504 trillion yuan, a year-on-year increase of 9.2% [8] - Health care spending was 1.1004 trillion yuan, up 4.3% year-on-year, while education spending reached 2.1483 trillion yuan, increasing by 5.9% [8] - The government is prioritizing fiscal investments in areas that directly impact the quality of life for citizens, fostering a positive cycle between economic growth and improved living standards [8]

Group 1: Fiscal Performance Overview - The overall fiscal performance in the first half of 2025 is stable, with increased fiscal spending supporting economic stability [1] - National general public budget revenue reached 11.5566 trillion yuan, a year-on-year decrease of 0.3%, while general public budget expenditure was 14.1271 trillion yuan, an increase of 3.4% [1] - The broad fiscal expenditure (including general public budget and government fund budget) grew by 8.9%, significantly higher than the broad fiscal revenue growth of -0.6% [1] Group 2: Tax Revenue Trends - National tax revenue for the first half of 2025 was approximately 9.29 trillion yuan, down 1.2% year-on-year, which is lower than the economic growth rate of 5.3% [2] - The decline in tax revenue is attributed to multiple factors, including falling industrial product prices, economic downturn, and tax reduction policies [2] - Tax revenue decline has been narrowing since April, with major tax categories showing stable growth, including domestic value-added tax and personal income tax [3] Group 3: Government Fund Revenue - Local government land transfer revenue was 1.4271 trillion yuan, down 6.5%, but this decline is less severe compared to earlier months [4] - The narrowing decline in land sales revenue reflects improvements in the real estate market due to various supportive policies [5] Group 4: Debt Issuance and Financing - The issuance of government bonds reached a record high of 7.88 trillion yuan in the first half of 2025, an increase of 35.28% year-on-year [5] - Net financing from government bonds was 7.66 trillion yuan, up 4.32 trillion yuan year-on-year [6] Group 5: Social Spending and Policy Focus - Social security and employment spending reached 2.4504 trillion yuan, growing by 9.2%, indicating a strong focus on social welfare [7] - The government is committed to increasing the "people's livelihood" content in fiscal spending and improving the efficiency of fund usage [8] Group 6: Debt Management and Risk Mitigation - The implementation of debt replacement policies has alleviated liquidity pressure on local governments and promoted economic development [9] - The fiscal department is focused on ensuring the effective implementation of various debt support policies to sustain economic stability [9]