Core Viewpoint - The year 2025 is pivotal for China's economy, emphasizing the need for internal strengthening to address external challenges and ensure sustainable development [1] Group 1: Expanding Domestic Demand - The potential of China's consumer market is significant, necessitating the implementation of actions to boost consumption and increase residents' income [2] - Effective investment is crucial for expanding domestic demand, stabilizing growth, and promoting transformation, with a focus on both physical and human capital [2] - Efforts should be made to streamline the national market and eliminate barriers to investment, ensuring a unified market [2] Group 2: Fostering Technological Innovation - Emphasizing innovation as a key to overcoming challenges, the focus should be on enhancing innovation capabilities and improving quality and efficiency [3] - Establishing international technology innovation centers in key regions is essential for fostering original innovation and supporting China's modernization [3] - A comprehensive plan for education, technology, and talent development is necessary to meet high-quality development needs and international competition [3] Group 3: Risk Mitigation - Proactive risk assessment and management are vital for maintaining strategic control and enhancing resilience in development [4] - Progress has been made in addressing risks in key areas, including local government debt and small financial institutions, while ensuring systemic risk is avoided [4] - Policies must be coordinated to stabilize the real estate market and manage local government debt effectively, promoting sustainable development [4] Group 4: Strategic Focus and Leadership - Maintaining strategic focus and enhancing internal capabilities are crucial in the face of increasing uncertainties [5] - Strengthening the Party's leadership over economic work is essential for ensuring effective governance and unified efforts across regions [5] - Local governments and departments should tailor their approaches to implement central policies, enhancing internal motivation and competitiveness [5]

Market Overview - The Shanghai Composite Index experienced a fluctuation with a weekly trading volume exceeding 1.7 trillion yuan, reaching over 2 trillion yuan on Monday and Friday. The index fell by 0.34% while the Shenzhen Component Index rose by 0.84%, the ChiNext Index increased by 2.74%, and the STAR 50 Index gained 1.72% [1][3][5] Economic Outlook - The Central Political Bureau and the Central Economic Work Conference held in December set the direction for economic work in 2026, emphasizing the expansion of domestic demand, fostering new growth drivers, and mitigating risks as key tasks to ensure a good start for the 14th Five-Year Plan [2][3][8] - November exports showed resilience with a year-on-year growth rate of 5.9%, while the Consumer Price Index (CPI) continued to recover, increasing by 0.7% year-on-year, marking the highest level since March 2024 [11][12] Policy Insights - The Central Economic Work Conference highlighted the importance of stabilizing employment, enterprises, markets, and expectations, with a focus on quality improvement and effective growth. The policy framework aims to transition from scale growth to quality enhancement, emphasizing the need for better coordination between domestic economic work and international trade challenges [9][10][20] - The meeting introduced new policy measures, including flexible use of monetary tools like reserve requirement ratio cuts and interest rate reductions, to maintain liquidity and support investment recovery [10][20] Sector Recommendations - The report suggests focusing on sectors such as Technology, Media, Telecommunications (TMT), public utilities, finance, and electric power equipment for potential investment opportunities [15][20] Export and Import Dynamics - The report notes that while exports to the U.S. have decreased, exports to emerging markets remain robust, with significant growth in automobile exports, which surged by 53% year-on-year. However, imports showed a modest increase of 1.9% year-on-year, influenced by weak energy prices and sluggish domestic demand [11][12]

Group 1 - The important meeting signals a shift in fiscal policy from "increasing deficit and intensity" to "stabilizing deficit and focusing on implementation" [2] - Monetary policy now incorporates "economic growth" and "price recovery" as core KPIs, indicating a clear focus on stabilizing growth and promoting inflation [2] - The emphasis on optimizing internal demand structure highlights the importance of consumer potential and stabilizing investment [2] Group 2 - The meeting underscores the significance of domestic consumption as a primary driver of economic growth, with expectations for continued encouragement of consumption policies in 2026 [3] - Specific A-share ETFs related to internal demand include Food and Beverage ETF (515170.SH), Tourism ETF (562510.SH), Agricultural 50 ETF (516810.SH), and Consumer Electronics ETF (159732.SZ) [3] - The focus on "anti-involution" and state-owned enterprise reform is expected to be a policy priority in 2026 [2]