Core Viewpoint - The international bond market is facing significant turmoil, particularly with the ongoing issues surrounding U.S. debt, as major economies like China, the U.S., and Japan grapple with rising debt levels and associated risks [1][4][35]. Group 1: U.S. Debt Situation - China has significantly reduced its holdings of U.S. Treasury bonds, now holding approximately $750 billion, nearly half of its peak [1]. - The U.S. government debt has reached over $30 trillion, with interest payments skyrocketing to over $1.1 trillion, leading to unsustainable fiscal pressures [8][35]. - The U.S. debt-to-GDP ratio is concerning, with a significant portion of government spending now allocated to interest payments, raising fears of a potential debt crisis [8][21]. Group 2: Credit Rating and Market Demand - The U.S. has seen multiple downgrades in its sovereign credit rating due to political gridlock and rising debt levels, which has diminished investor confidence [10][11]. - A recent auction of U.S. debt saw $72 billion go unsold, indicating a lack of demand for U.S. Treasury bonds [11]. - The Federal Reserve has stepped in to purchase over $40 billion in U.S. debt in May alone, highlighting the imbalance between supply and demand in the bond market [12][13]. Group 3: Japan's Debt Challenges - Japan's debt stands at approximately 1,323 trillion yen (around $9.2 trillion), which is 219% of its GDP, raising significant market concerns [24][35]. - The Bank of Japan has been actively purchasing government bonds to stabilize prices, but this approach is unsustainable in the long term [26][30]. - Japan faces a lack of investment attractiveness due to low bond yields and high credit risk, leading to a potential sell-off in its bond market [29][30]. Group 4: China's Debt Management - China's total debt is approximately 88.1 trillion yuan (around $12.3 trillion), with a debt-to-GDP ratio of 65%, which is relatively lower compared to the U.S. and Japan [35][40]. - The Chinese government has been proactive in managing its debt, reducing interest rates to alleviate the burden on borrowers and stimulate economic growth [41]. - Despite challenges such as hidden local government debts, China's economic resilience and growth potential provide a more favorable outlook compared to the U.S. and Japan [41][43].

Group 1: Manufacturing Sector - In May, the manufacturing Purchasing Managers' Index (PMI) rose to 49.5%, an increase of 0.5 percentage points from the previous month, indicating an improvement in manufacturing sentiment [1] - The production index for manufacturing activities returned to the expansion zone at 50.7%, up 0.9 percentage points from last month, reflecting a recovery in production activities [1] - New orders index increased to 49.8%, up 0.6 percentage points, while the business activity expectation index rose to 52.5%, indicating stable confidence among manufacturers regarding market development [1] Group 2: High-Tech and Equipment Manufacturing - The high-tech manufacturing PMI stood at 50.9%, maintaining expansion for four consecutive months, while the equipment manufacturing and consumer goods PMIs were 51.2% and 50.2%, respectively, both showing month-on-month increases [2] - New orders indices for both high-tech and equipment manufacturing remained above 52%, indicating strong market demand [2] Group 3: Non-Manufacturing Sector - The non-manufacturing business activity index was 50.3%, slightly down 0.1 percentage points but still above the critical point, indicating stable growth in the service sector [3] - The service sector business activity index rose to 50.2%, driven by increased consumer activity during the "May Day" holiday, with a business activity expectation index of 56.5%, reflecting optimism among service providers [3] - The construction industry continued to expand, with the civil engineering business activity index at 62.3%, up 1.4 percentage points, indicating accelerated project construction [3] Group 4: Economic Outlook and Policy Implications - The rise in manufacturing PMI in May suggests that proactive macroeconomic policies are beginning to show results, although the price index remains slightly down, indicating an oversupply situation [4] - Experts emphasize the need for continued government investment in public goods to support production and employment recovery, while also advocating for measures to boost domestic demand and enhance external trade [4] - The manufacturing sector's recovery is still under observation due to external uncertainties and the fact that many sub-indices remain below 50%, indicating potential risks [4]

Economic Overview - In April, China's major economic indicators showed stable and relatively fast growth, continuing a positive trend despite facing severe challenges from complex international environments and external shocks [2][3][4] - The overall economic recovery foundation remains unstable, necessitating increased counter-cyclical adjustments in macroeconomic policies and expanded government investment in public goods to stimulate production and employment [2][3][4] Production and Supply - In April, the industrial added value for large-scale enterprises grew by 6.1% year-on-year, while the service production index increased by 6.0%, indicating a relatively fast pace of growth [4][5] - However, both production and supply growth showed signs of slowing down compared to March, primarily due to a market condition of oversupply leading to declining prices, with the Producer Price Index (PPI) falling by 2.7% year-on-year [4][5][6] Domestic Demand - Domestic demand expanded steadily in April, with retail sales of consumer goods increasing by 5.1% year-on-year, supported by policies encouraging the replacement of old consumer goods [5][6] - The total import and export volume reached 38,391 billion yuan, a year-on-year increase of 5.6%, although export growth showed a significant decline compared to March [5][6] Investment Trends - Investment growth showed a slight decline, with cumulative year-on-year growth at 4%, and manufacturing investment growth at 8.8%, both lower than the previous quarter [5][6] - Real estate investment continued to decline, with a cumulative year-on-year decrease of 10.3%, indicating a worsening trend [5][6] Policy Recommendations - To effectively stimulate market confidence and unleash domestic demand potential, it is crucial to enhance the government's counter-cyclical policy measures and significantly increase public investment [6][7] - The focus should be on improving the quality of public goods and expanding investment to drive production, employment, and income growth, thereby activating the vast domestic demand market [6][7]