Domestic Economic Insights - August high-frequency data indicates low operating rates in midstream products, reflecting the effects of anti-involution policies, while upstream operating rates are stronger than last year[2] - Cement and asphalt production improvements suggest a rebound in infrastructure investment, with exports still supported by volume[2] - July economic data shows industrial value-added growth at 5.7% year-on-year, while fixed asset investment growth is at 1.6%[20] Monetary Policy and Market Trends - If the DR007 rate rises above 1.5%, it indicates the central bank's intention to marginally tighten liquidity, aligning with previous statements on reversing the misalignment of monetary policies between China and the US[2] - The central bank's recent financial data shows a net increase in social financing of 1.16 trillion RMB, with new RMB loans at -50 billion RMB, reflecting weak financing demand[19] Currency and Asset Valuation - A potential appreciation of the RMB could lead to a revaluation of Chinese assets, enhancing the comparative advantages of inflation and domestic demand strategies[2] - The RMB exchange rate is expected to return to the 6 range, increasing the attractiveness of Chinese assets[2] International Economic Context - The US July PPI data may lead the Federal Reserve to lock in a 25 basis point rate cut in September, with the Jackson Hole meeting being a key observation window[18] - The impact of tariffs on US CPI is expected to manifest gradually, with only 20%-30% of the tariff impact reflected in July's CPI data[18] Market Performance Overview - A-share market saw significant gains, with the Shanghai Composite Index closing below 3700, while the Hang Seng Index showed modest increases[40] - The bond market experienced substantial adjustments, with US 10-year Treasury yields rising[40]

Core Viewpoint - The data from May 2025 indicates that the U.S. is entering an active destocking phase, with total inventory increasing by 2.62% year-on-year and total sales increasing by 3.30% year-on-year, both showing a decline from previous values [1][2]. Overall Inventory Cycle - In May, total U.S. inventory increased by 2.62% year-on-year, down from 3.15% previously, while total sales increased by 3.30% year-on-year, down from 3.68% [2]. - The U.S. is confirmed to be in an active destocking phase, with a significant import surge occurring from November 2024 to March 2025, and imports returning to normal levels in April and May 2025 [2]. - A short-term replenishment demand is expected in June and July 2025, but active destocking is anticipated to continue thereafter, with excess imports expected to be depleted by November 2025 [2]. U.S. Industry Inventory Cycle - Among 14 major industries in May, six are in active destocking, including upstream oil, natural gas, and consumer fuels, chemical products, midstream transportation, and downstream automotive and automotive parts, textiles, clothing, luxury goods, and food, beverages, and tobacco [3]. - Historical inventory levels show that construction materials, chemical products, metals and mining, paper and forestry products, and technology hardware and equipment have higher inventory levels compared to historical percentiles [3]. Upstream Inventory Trends - Oil, natural gas, and consumer fuels have been in active replenishment from July 2023 to May 2024, transitioning to active destocking by June 2024 and remaining in that phase until May 2025 [4]. - Chemical products are expected to transition from passive replenishment to active destocking by May 2025 [5]. - Construction materials and metals and mining are currently in passive replenishment, with a high likelihood of transitioning to active destocking in the future [6]. Midstream Inventory Trends - The transportation sector is likely in active destocking, while paper and forestry products, as well as electrical equipment and appliances, are in passive replenishment [7]. - Mechanical manufacturing has transitioned to active replenishment as of March 2025 [7]. Downstream Inventory Trends - The automotive and automotive parts sector is in active replenishment as of December 2024 [8]. - Household durable goods, textiles, clothing, luxury goods, food, beverages, and tobacco are in passive replenishment, with some expected to transition to active replenishment in April and May 2025 [8].

Overall Inventory Cycle - In May, the total inventory in the U.S. increased by 2.62% year-on-year, down from 3.15% in the previous period[12] - Sales in May rose by 3.30% year-on-year, compared to 3.68% previously[12] - The U.S. is confirmed to be entering an active destocking phase, with a significant import surge occurring from November 2024 to March 2025[12] - A brief replenishment demand is expected in June and July, after which active destocking will continue[12] Industry Inventory Cycle - Six out of fourteen major industries are in active destocking as of May, including oil, gas, chemicals, transportation, automotive parts, textiles, and food[19] - The historical percentile for overall inventory in May is 32.4%, with construction materials at 83.6% and chemicals at 69.3%[19] - The first round of excess imports is estimated at $180 billion and the second at $100 billion, totaling $280 billion, which may be exhausted by November[12] - Recent rapid declines in copper prices are attributed to a 50% tariff on copper products while exempting raw materials, disrupting supply and demand dynamics[13] Risk Factors - The potential for U.S. economic fundamentals and policies to exceed expectations poses a risk to inventory and pricing stability[8]