Economic Growth and Price Trends - China's GDP growth is expected to remain above 5% for three consecutive quarters, but price levels continue to weaken[1] - CPI has shown negative growth for three consecutive months, while PPI has dropped to -3.3%[1] - In contrast to 2015, when growth and prices were negatively correlated, the current situation shows high growth with persistent price weakness[1] Historical Comparison - In 2015, GDP growth slowed from 7.1% in the first half to 6.9% by Q4, with PPI declining by 5.9% in Q4, the lowest since 2010[1] - Policy easing began in late 2014, with significant measures taken in 2015, leading to a recovery in both growth and prices by mid-2017[1] Current Economic State - The current economic state is characterized as atypical, with high growth not translating into price increases, indicating a potential trend of prolonged price weakness[1] - Marginal improvements in domestic prices are noted, with core CPI showing signs of recovery since Q4 of the previous year[1] Risk Factors - Key risks include geopolitical tensions, domestic policy implementation falling short of expectations, and potential global recession impacts[2]

Core Viewpoint - The current economic adjustment in China is characterized by a weak inflation cycle under a declining financial cycle, with productivity being a crucial dimension for analysis [1][8]. Financial Cycle - The financial cycle is defined as the long-term interaction between credit and housing prices, with a downward trend leading to credit contraction and insufficient domestic demand [9]. - During the financial cycle's expansion, productivity did not improve synchronously, indicating inefficient allocation of credit resources [12][19]. - The current financial cycle in China has seen a concentration of funds and labor in low-efficiency sectors, particularly real estate, leading to a decline in overall productivity growth [12][22]. Policy Implications - Historical experience suggests that during a declining financial cycle, both monetary and fiscal policies should be coordinated to stimulate the economy [2][33]. - The intensity of monetary and fiscal policies tends to increase as the negative impact of the cycle deepens, with a typical lag of 3 to 4 years before economic stabilization occurs [2][40]. - Current monetary policy efforts in China are relatively weaker compared to international averages, indicating room for further action [34][40]. Asset Implications - Accelerated policy efforts are expected to stabilize and potentially increase asset prices, with historical data showing that housing and stock prices tend to recover after initial declines [4][55]. - In the context of China's current economic environment, sectors such as finance, real estate, and technology are likely to perform better as policies are implemented [63]. - The ongoing global rebalancing of funds and a weak dollar environment may favor the revaluation of Chinese assets, particularly in light of domestic policy support [5][70]. Economic Development Trends - China's GDP growth from 2020 to 2025 is projected to significantly outperform international averages, attributed to factors such as manufacturing scale effects and pre-existing monetary and fiscal policy support [22][23]. - Price levels in China have shown similarities to international low-price differentiation scenarios, with a notable demand gap impacting inflation [23][24]. - The housing market in China has experienced a cumulative decline of 14% since the peak, which is more severe than the international average [24][26]. Conclusion - The analysis of the current economic cycle in China through the lenses of financial cycles, productivity, and price levels provides valuable insights into potential policy and asset performance [1][22].

美联储理事沃勒：仍然坚信关税将会对价格水平产生一次性影响。 ...