Economic Overview - The article discusses the prediction by US Treasury Secretary that the Chinese economy is on the verge of collapse due to the real estate sector's hard landing, but argues that this view is misguided [1][16] - Current issues in the Chinese economy include declining real estate, massive local debt, overcapacity, declining birth rates, and income inequality [1][16] Economic Fundamentals - China's economic fundamentals are strong, with the highest trade surplus and foreign exchange reserves globally, as well as the lowest central government debt ratio [1][16] - The total household savings in China is approximately 160 trillion yuan, with net savings around 80 trillion yuan, indicating a strong capacity to endure economic fluctuations [1][2] Real Estate Market - The real estate market in China has seen a decline for four years, with some areas experiencing a 50% drop in prices, but this has not led to a panic sell-off as seen in the US [4][5] - The stability in the Chinese real estate market is attributed to the high cash flow and savings of the population, which prevents a hard landing [17][18] Urbanization and Debt - China's rapid urbanization has led to a significant increase in local government debt, exceeding 100 trillion yuan, as cities expanded quickly to accommodate rural populations [12][13] - The government is now focusing on controlling new debt and revitalizing existing assets to manage this debt effectively [20][21] Policy Responses - The government is addressing issues such as local debt, overcapacity, and declining birth rates through various policies, including limiting urban expansion and promoting orderly exit of excess capacity [22][23] - Recent initiatives to boost birth rates include financial subsidies for families and free preschool education [23][24] Economic Transition - The article emphasizes that the challenges faced by the Chinese economy are a result of rapid development and that solutions will take time, with gradual improvements expected over the next few years [47][61] - The shift in resource allocation from manufacturing to consumer support is underway, indicating a transition in economic strategy [44][46] Comparison with the US - The US economy also faces significant challenges, but its strong monetary policy and the ability to print dollars provide a buffer against economic crises [50][52] - The article suggests that while both economies have their issues, China's economic fundamentals remain robust compared to the US, which may face greater internal instability [62][63]

Report Investment Rating No investment rating information is provided in the report. Core Viewpoints - The Central Urban Work Conference points out a new direction for urban development. Special bond support areas may be further tilted towards urban renewal, green - low - carbon, safety - resilience, and smart governance. Urban investment enterprises can participate in urban renewal and smart city operations to accelerate market - oriented transformation [7][9]. - Jilin plans to issue 26 billion yuan of special bonds for small and medium - sized banks to support the establishment of a provincial rural commercial bank. In the future, more provinces may issue relevant bonds to support small and medium - sized banks and explore the feasibility of supporting other local small and medium - sized financial institutions [11]. - This week, the issuance and net financing of local government bonds and urban investment bonds both increased, with different trends in issuance costs and structures [16][20]. Summary by Directory 1. News Review - **Central Urban Work Conference**: Held from July 14th to 15th, it emphasizes "five transformations" and "seven key tasks". Special bond support areas may be tilted towards urban renewal, etc., and urban investment enterprises can accelerate transformation [7][8][9]. - **Jilin's Special Bond Issuance**: Jilin plans to issue 26 billion yuan of special bonds for small and medium - sized banks on July 22nd. More provinces may follow suit to support small and medium - sized banks and explore supporting other local small and medium - sized financial institutions [11][12]. - **Early Redemption of Urban Investment Bonds**: 18 urban investment enterprises redeemed bond principal and interest in advance this week, involving 20 bonds with a total scale of 2.704 billion yuan [14][15]. - **Cancellation or Postponement of Urban Investment Bond Issuance**: No urban investment bonds were cancelled or postponed this week [16]. 2. Issuance of Local Government Bonds and Urban Investment Enterprise Bonds - **Local Government Bonds**: 45 local bonds were issued this week, with a scale of 231.79 billion yuan, a net financing of 110.229 billion yuan. The issuance of new special bonds exceeded half of the annual quota. The weighted average issuance interest rate rose to 1.80%, and the spread widened to 10.35BP [16]. - **Urban Investment Bonds**: 135 urban investment bonds were issued this week, with a scale of 88.943 billion yuan, and the net financing was - 3.301 billion yuan. The overall issuance interest rate was 2.13%, and the spread was 66.47BP. Four overseas urban investment bonds were issued, with a total scale of 4.467 billion yuan [20]. 3. Trading of Local Government Bonds and Urban Investment Enterprise Bonds - **Funds and Credit Rating Adjustment**: The central bank net - withdrew 22.65 billion yuan this week. On July 9th, 2025, Zhongzheng Pengyuan downgraded the rating of "22 Shenshan Investment MTN001" of Guangdong Shenshan Investment Holding Group Co., Ltd. from AAA to AA+ [23][24]. - **Trading Volume and Yield**: The trading volume of local government bonds was 390.614 billion yuan, a decrease of 30.89%. The trading volume of urban investment bonds was 284.91 billion yuan, a decrease of 2.16%. The yields of both mostly increased [24]. - **Abnormal Trading of Urban Investment Bonds**: 18 urban investment entities had 22 abnormal bond trades, with an increase in the number of entities, bonds, and trades [25]. 4. Important Announcements of Urban Investment Enterprises 86 urban investment enterprises issued announcements on changes in senior management, legal representatives, etc., including changes in executives, legal representatives, directors, and supervisors; changes in controlling shareholders and actual controllers; equity/asset transfers; changes in fund use; cumulative new borrowings; and external guarantees [29].