Core Viewpoint - The article discusses the implications of recent monetary policy changes in China, particularly focusing on the dual interest rate cuts announced by the central bank and their effects on investment and economic dynamics. Group 1: Monetary Policy Changes - The central bank announced a reduction in the 7-day reverse repurchase rate from 1.50% to 1.40% effective May 8, 2025 [1] - Additionally, the reserve requirement ratio for financial institutions was lowered by 0.5 percentage points, with a more significant reduction of 5 percentage points for auto finance and leasing companies starting May 15, 2025 [2] Group 2: Bond Market Reactions - Despite the rate cuts, long-term bond yields have not decreased; instead, the yield on the 10-year government bond rose by nearly 2 basis points to 1.64% [5] - The central bank's previous announcement of a 600 billion MLF operation resulted in a net injection of 500 billion, equivalent to a 25 basis point reserve requirement cut, yet long-term yields remained stable [8][12] Group 3: Investment Curve Dynamics - The article explains the concept of the investment curve's elasticity, indicating that when the savings curve expands due to rate cuts, the increase in investment is minimal if the investment curve is steep [17] - Conversely, if the investment curve is flat, a significant increase in investment occurs with a smaller decrease in long-term yields, indicating a more elastic investment response [19] Group 4: Domestic Demand and Consumption - Domestic demand is influenced by both consumption and investment, with lower interest rates potentially suppressing consumption while promoting investment [22] - The article posits that if the investment curve lacks elasticity, lowering interest rates may not stimulate domestic demand, leading to increased exports instead [20][28] Group 5: Government's Investment Focus - The government is portrayed as an "investment-oriented" entity, actively working to repair the elasticity of the investment curve through various policies [36][37] - The article suggests that the government prefers investment over consumption, especially in scenarios where there is ample investment space [26]