1. Report's Industry Investment Rating No information provided in the content. 2. Core Viewpoints of the Report - In 2025, the central bank implemented a moderately loose monetary policy, keeping liquidity abundant. The yields of interest - rate bonds showed an overall fluctuating upward trend, while the issuance rates of credit bonds decreased. The total issuance of interest - rate and credit bonds increased steadily year - on - year. Credit risks were converging. Looking forward to 2026, bond market yields are expected to remain volatile at low levels, credit spreads may show structural differentiation, the bond market issuance scale is expected to grow steadily, and bond market credit risks will continue to converge with the default rate possibly at a historical low [2]. 3. Summary by Relevant Catalogs 3.1 Bond Market Overall Situation - In 2025, China's bond market issued a total of 88.52 trillion yuan of various bonds, a year - on - year increase of 12.35%. Excluding inter - bank certificates of deposit, the total issuance of various bonds was 54.70 trillion yuan, a year - on - year increase of 15.40%. By the end of 2025, the stock of various bonds in China reached 196.17 trillion yuan, a growth of 11.45% compared with the end of 2024 [4]. 3.1.1 Interest - rate Bonds - **Yield Trend**: The yield of China's treasury bonds showed an overall fluctuating upward trend in 2025. The 10 - year treasury bond yield fluctuated in five different stages throughout the year, affected by factors such as economic data, policy expectations, and market sentiment [5]. - **Issuance Scale**: The bond market issued 32.39 trillion yuan of interest - rate bonds in 2025, a year - on - year increase of 20.63%. The issuance scale of each type of bond increased. By the end of 2025, the stock of interest - rate bond varieties in China's bond market was 123.51 trillion yuan, a growth of 14.75% compared with the previous year - end [8][9]. 3.1.2 Credit Bonds - **Issuance Interest Rate**: In 2025, the issuance rates of major credit bonds showed a downward trend. Taking the credit bonds issued by AAA - rated entities as an example, the average issuance rates of major bond types with various maturities decreased [10]. - **Issuance Volume**: The issuance scale of credit bonds reached 22.06 trillion yuan in 2025, a year - on - year increase of 8.14%. By the end of 2025, the stock of credit bonds was 51.35 trillion yuan, a year - on - year increase of 8.61%. Different sub - categories of credit bonds had different issuance trends [13]. - **Non - financial Enterprise Bonds**: In 2025, non - financial enterprises issued 15,790 issues of bonds with a total issuance scale of 13.94 trillion yuan. The issuance period and scale increased by 2.87% and 1.70% year - on - year respectively. By the end of 2025, the stock of non - financial enterprise bonds was 31.29 trillion yuan, a growth of 10.00% compared with the previous year - end [14]. - **Non - policy Financial Bonds**: Financial institutions issued 1,488 issues of non - policy financial bonds in 2025, with a total issuance scale of 5.66 trillion yuan. The issuance period and scale increased by 34.54% and 24.74% year - on - year respectively. By the end of 2025, the stock of non - policy financial bonds was 15.66 trillion yuan, a growth of 11.35% compared with the previous year - end [18]. - **Asset - backed Securities**: In 2025, the issuance period, number, and scale of asset - backed securities all increased by about 15%. By the end of 2025, the stock of asset - backed securities was 3.61 trillion yuan, an increase of 9.16% compared with the previous year - end [22]. - **Other Credit Bonds**: In 2025, the issuance period and scale of other credit bonds increased year - on - year. By the end of 2025, the stock of other credit bonds was 1.07 trillion yuan, a decrease of 14.81% compared with the previous year - end [24]. 3.2 Bond Market Operation Characteristics - **Issuance of Urban Investment Bonds and Industrial Bonds**: In 2025, the issuance of urban investment bonds decreased, while the issuance of industrial bonds increased. The net financing of urban investment bonds decreased, and that of industrial bonds increased [27]. - **Rating and Credit - grade Distribution**: The proportion of bonds without debt ratings continued to increase, and the proportion of bonds issued by AAA - rated entities continued to rise. The credit grades of non - financial enterprise credit bond issuers were mainly distributed between AAA and AA [29][34]. - **Enterprise Nature of Issuers**: In 2025, state - owned enterprises were still the main issuers of non - financial enterprise bonds. The proportion of bonds issued by central state - owned enterprises and private enterprises increased, while that of local state - owned enterprises decreased [36]. - **Regional and Industry Differentiation**: The regions and industries involved in non - financial enterprise bond issuers remained differentiated. In terms of regions, the issuance scale of non - financial enterprise bonds in some regions increased, while in some others it decreased. In terms of industries, the issuance scale of some industries increased, while in some others it decreased [41]. - **Innovative Bond Issuance**: In 2025, the issuance of innovative bonds maintained a good momentum. The issuance period and scale of science and technology innovation bonds increased by about 80%, and the issuance of other innovative bonds also increased significantly [43]. - **Credit Risk Convergence**: In 2025, the number of new default issuers, the number of defaulted bonds, and the default amount in China's bond market all decreased year - on - year. The number of new extended - maturity issuers decreased, but the number of extended - maturity bonds and the extended - maturity scale increased. Overall, the bond market credit risk showed a converging trend [47]. 3.3 Bond Market Outlook - **Yield and Credit Spread**: Interest - rate bond yields are expected to remain volatile at low levels, with limited upside and downside space. Credit bond yields are expected to follow interest - rate bonds and maintain a low - level volatile trend. Credit spreads are expected to remain low, but market disturbances may increase [48][49]. - **Issuance Scale**: In 2026, the issuance scale of interest - rate bonds is expected to increase due to a more active fiscal policy. The issuance scale of financial institution bonds in the credit bond market is expected to grow steadily, while the issuance of urban investment bonds may shrink slightly, and the issuance of industrial bonds is expected to grow continuously [50]. - **Credit Risk**: In 2026, the bond market credit risk is expected to continue to converge, and the default rate may be at a historical low. Different types of bonds, such as urban investment bonds, real estate enterprise bonds, financial bonds, and convertible bonds, have different credit risk characteristics and need to be monitored [51][52].

1. Report Industry Investment Rating No relevant content provided. 2. Core Viewpoints of the Report - In 2025, the bond market credit risk release further slowed down, with a significant decline in the scale of default bonds and the number of new default issuers. However, due to factors such as the structural differences in the financing environment and debt roll - over pressure, the structural risks in some areas were still in the process of orderly clearance. In 2026, the credit risk clearance process in the bond market is expected to remain stable and orderly, with the default rate fluctuating within a low range of 0.2% - 0.3%. But attention should be paid to the credit risks in five key areas [4][5][23]. 3. Summary by Relevant Catalogs 2025 Review: Slow but Unfinished, Credit Risks Show Six Characteristics - **Lowest Default Scale in a Decade and Low Default Rate, Continued Slow - down of Risk Release**: In 2025, the bond market default risk release further slowed down. The scale of default bonds was the lowest in a decade, with 26 new default bonds, a 67% year - on - year decrease in default scale to 223.4 billion yuan, and 12 new default issuers. The monthly rolling default rate in the public offering market showed a trend of first decreasing and then increasing, with an end - of - year rate of 0.27%, basically the same as at the end of 2024 [6]. - **Risk Clearance Concentrated in Private Enterprises, but Dispersed in Regions and Industries**: Among the 12 new default issuers, 10 were private enterprises. The default risks showed a multi - point and multi - industry distribution, covering 8 industries and 7 provinces in the eastern, central, and western regions. Non - bank financial institutions had an increase in defaults [9]. - **New Default Events Driven by Industry Cycles, Strategic Mistakes, and Governance Defects**: Industry cycles led to weakened profitability of some issuers; strategic mistakes such as over - aggressive diversification or high - premium acquisitions caused resource misallocation; governance defects like high - proportion equity pledges and related - party transactions eroded the operating foundation. Negative events could also lead to a deterioration of the financing environment and accelerate default [11][12]. - **"Re - extension" Drove the Growth of Extension Scale, with Real Estate Enterprises Accounting for Nearly 80%**: In 2025, there were more bond extension events. The total scale of extended bonds was 534.56 billion yuan, a 28% year - on - year increase. Over 60% were re - extended bonds, with an average extension period of 2.09 years. Real estate enterprises were the main issuers of extended bonds, with a scale of about 410.90 billion yuan, accounting for 77% of the total [13][14]. - **Improved Risk Resolution Mechanism and Steady Progress in Default Bond Disposal**: A series of risk prevention policies provided institutional support for risk resolution. 10 issuers made substantial progress in default disposal, but the actual payment progress of default bonds was still slow, with the proportion of paid - off bonds less than 20% [15][17]. - **Increased Positive Rating Actions under Risk Mitigation, Continued Differentiation in Rating Adjustments**: In 2025, the number and proportion of upward rating actions increased. There were 136 main body rating adjustments, with 61 downward and 75 upward. Rating adjustments showed differentiation between state - owned and private enterprises, as well as among different industries [18][20][21]. 2026 Outlook: Stable but with Concerns, Focus on Structural Risks in Five Areas - **Risk of Deterioration in the Credit Fundamentals of Export - Oriented Enterprises Dependent on External Demand**: In 2026, the global trade volume growth rate may slow to 0.5%. Trade protectionism and green barriers increase the compliance costs of export enterprises and affect order stability. Some export enterprises with high market concentration, low product added value, and weak cost - transfer ability may face credit deterioration [24]. - **Liquidity Risks of Weak - Fundamentals Entities in Traditional and Emerging Industries during Industrial Structure Transformation**: Traditional manufacturing industries face problems such as insufficient demand and rising costs, while emerging industries face challenges such as rapid technological iteration and over - capacity. In 2026, the bond maturity pressure in related industries remains, and some high - leverage entities may face credit deterioration and liquidity risks [25]. - **Uncertainty Risks in the Process of M&A, Reorganization, or Debt Extension of Real Estate Enterprises**: In 2025, the real estate market showed some signs of recovery, but the recovery momentum was still weak. Tail - end real estate enterprises still faced financing difficulties and relied on debt extension and reorganization. In 2026, about 400 billion yuan of bonds will mature, and there are risks in the M&A and reorganization process [27]. - **Credit Risks of Regional Small and Medium - Sized Financial Institutions due to the Interweaving of Internal and External Risk Factors**: Some non - bank financial institutions have faced frequent risk events, affected by regional economic pressure and their own governance problems. Attention should be paid to the risk exposure structure and the ability to cover potential losses, as well as the risk of related - party risk transmission [28]. - **Evolution of Operating and Liquidity Risks of Urban Investment Enterprises under the Acceleration of the "Platform Exit" Process and Debt Resolution Pressure**: In 2026, as the key stage of the "platform exit" for urban investment enterprises, they face pressure in debt resolution, asset revitalization, and government arrears. Their market - oriented transformation is not effective, and there are risks of liquidity and operation, as well as the possibility of risk resonance and spillover [30].

Group 1 - The Ministry of Finance and the State Taxation Administration announced the resumption of value-added tax on interest income from newly issued government bonds, local government bonds, and financial bonds starting from August 8, while maintaining tax exemption for bonds issued before this date until maturity [1] - In the capital market, the yields on major interbank bonds mostly declined, with 3-year and longer-term government bond active yields dropping by 1-2 basis points; the overall bond futures market showed mixed results with narrow fluctuations [1] - The People's Bank of China conducted a reverse repurchase operation of 126 billion yuan, net withdrawing 663.3 billion yuan, while the interbank market remained liquid with overnight repurchase rates declining as expected [1] Group 2 - According to New Century Rating, the credit risk situation in the domestic bond market remained stable in the second quarter of 2025, with new defaults and extensions reaching a historical low; the exposure of real estate risks is nearing an end, and the market is stabilizing [2] - The rating agency noted that stimulus policies such as interest rate cuts are marginally improving residents' willingness to purchase homes and take out loans, with several distressed real estate companies proposing debt restructuring plans [1][2] - The financing control of local government financing vehicles (LGFVs) remains strict, with the frequency of credit risk events such as non-standard risks and commercial paper defaults decreasing year-on-year [1]

Group 1: Report's Investment Rating for the Industry - No information provided Group 2: Core Viewpoints of the Report - In the context of effectively preventing risks in key areas, the bond default risk in the future market will remain under control. However, due to the complex international situation and domestic economic challenges, five types of risks need attention: changes in the fundamentals and risk evolution of export - oriented enterprises under tariff games, uncertainties in debt repayment during the mergers and reorganizations of real - estate enterprises, uncertainties faced by traditional industries during transformation and upgrading, risks of delisting or market fluctuations of convertible bond issuers due to weakened fundamentals, and potential impacts on the solvency of some small and medium - sized financial institutions from multiple risk factors [4][20]. - In Q1 2025, the credit risk in the bond market was generally controllable, with a decrease in the number of new defaulting entities and low - level fluctuations in the rolling default rate. The risk differentiation continued, with private enterprises' risks being continuously cleared. The default exposure of real - estate enterprises slowed down, but they remained the main entities for bond extensions. Negative rating actions decreased, and the progress of default disposal was slow [4]. Group 3: Summary by Relevant Catalogs Review: Five Characteristics of Bond Market Credit Risk in Q1 1. Decrease in the Number of New Defaulting Entities and Low - Level Fluctuations in the Rolling Default Rate - In Q1, the bond market default risk was generally controllable. There were 3 new defaulting issuers, 1 less than the same period last year. The new default scale was 41.28 billion yuan. The monthly rolling default rate in the public offering market first rose and then fell, reaching 0.25% at the end of March, the same as at the end of 2024 [4]. 2. Continued Risk Differentiation and Continuous Clearance of Private Enterprises' Risks - Support policies for private enterprises have been upgraded this year, but the transmission has a time - lag. In Q1, the credit bond financing scale of private enterprises was limited, with issuance less than 140 billion yuan, accounting for about 3% of credit bonds, and a net outflow of nearly 1.6 billion yuan. The 3 new defaulting entities in Q1 were all private enterprises, and the scale of bond extensions by private enterprises was 5.687 billion yuan, accounting for 92% of the total [9]. 3. Slowdown in the Exposure of Real - Estate Enterprises' Defaults, but They Remained the Main Entities for Extensions, and Tail Risks Were Still Being Cleared - In Q1, the default release of real - estate bonds slowed down significantly, with no new defaulting entities. The scale of bond extensions by real - estate enterprises was 5.659 billion yuan, accounting for over 90%. As of now, the cumulative scale of real - estate bond extensions is nearly 200 billion yuan, about 65% of the bonds have been extended again or multiple times, and 27% of the extended bonds defaulted [12]. 4. Decrease in Negative Rating Actions, and All Entities with Downgraded Levels Were Convertible Bond Issuers - From January to March, there were 17 rating actions in the bond market, including 10 downgrades of issuer levels, 1 less than the same period last year. The 7 entities with downgraded levels were all convertible bond issuers, mainly due to weakened profitability, losses, and legal issues [16]. 5. Ordered Progress of Default Disposal, but Slow Progress in Substantive Repayment - In Q1, the disposal of defaulted bonds progressed in an orderly manner. The reorganization application of Shanshan Group was accepted by the court, and the reorganization plan (draft) of Contemporary Technology passed the vote of the creditor's meeting. As of the end of March 2025, the scale of bonds with disclosed completed disposal accounted for 19.2% of the total defaulted bonds, and the proportion of bonds that completed repayment or were delisted was only 16.9% [19]. Outlook: Default Risks Are Stable and Controllable under the Risk - Prevention Tone, and Five Types of Risks Need Local Attention 1. Pay Attention to the Possibility of Fundamental Changes and Risk Evolution of Export - Oriented Enterprises under Tariff Games - Under the current intensified tariff game, domestic export - oriented enterprises face multiple pressures such as rising costs and shrinking market shares. Exchange - rate fluctuations also affect their earnings. Small and medium - sized export enterprises are at higher risk, and industries such as machinery, textiles, and chemicals need attention [20]. 2. Pay Attention to the Uncertainty of Debt Repayment Caused by Derivative Risks during the Mergers and Reorganizations of Real - Estate Enterprises - As of the end of March 2025, the real - estate bond stock was about 1.57 trillion yuan, nearly 20% less than at the end of 2020. However, with the increase in industry concentration, some real - estate enterprises may face mergers, reorganizations, or liquidation, and the risks during the debt - resolution process need attention [21]. 3. Pay Attention to the Uncertainties Faced by Traditional Industries during Transformation and Upgrading - In the trend of industrial upgrading, traditional industries may face challenges such as shrinking demand and technological innovation. For example, traditional automobile dealers are affected by the direct - sales model of new - energy vehicles. The risk of traditional industries being squeezed out of the market needs to be highly concerned [22]. 4. Pay Attention to the Risks of Delisting or Market Fluctuations of Convertible Bond Issuers due to Weakened Fundamentals - Since 2025, the financial delisting rules have become stricter. About 46% of convertible bond issuers that disclosed annual performance forecasts expect losses in 2024. There is a risk of delisting and market fluctuations, and the uncertainty of repayment due to delisting or price drops needs to be vigilant [23]. 5. Pay Attention to the Potential Impacts on the Solvency of Some Small and Medium - Sized Financial Institutions from Multiple Risk Factors - Small and medium - sized financial institutions have experienced risk events in recent years. Multiple risk factors such as regional economic pressure, industry fluctuations, and their own operational weaknesses may affect their bond repayment ability. Attention should also be paid to the risks during mergers, reorganizations, and market exits [24].