Core Viewpoint - The Nasdaq China Golden Dragon Index rose over 2%, indicating a strong interest from U.S. investors in Chinese stocks, reaching the highest level in five years, as reported by Morgan Stanley [1] Group 1: Market Performance - Notable gains were observed in popular Chinese stocks, with Zai Lab (ZLAB.US) up over 12%, GDS Holdings (GDS.US) up over 8%, and both Hesai (HSAI.US) and Alibaba (BABA.US) rising over 4% [1] - The Shanghai Composite Index also experienced a significant increase of 1.65% on the same day [1] Group 2: Investor Sentiment - Morgan Stanley reported that over 90% of investors expressed a willingness to increase their exposure to the Chinese market, marking the highest level since the peak of the Chinese stock market in early 2021 [1] - The report highlighted several reasons for the resurgence of U.S. investor interest in China, including China's leadership in specific industries, efforts to boost the stock market and stabilize the economy, improved liquidity conditions, and a rising demand for diversified investments [1] Group 3: Foreign Investment Trends - The International Institute of Finance (IIF) reported that in August, foreign investors allocated nearly $45 billion to emerging market stocks and bonds, the highest level in nearly a year [1] - A significant portion of this investment flowed into the Chinese market, with a net inflow of $39 billion into Chinese bonds and stocks combined in August [1]

Core Viewpoint - The State Administration of Foreign Exchange (SAFE) has signaled a stable exchange rate and reported that foreign investment in domestic stocks and funds increased by over $10.1 billion in the first half of 2025, indicating a growing global interest in the Chinese market [2][3]. Group 1: Foreign Investment Trends - In the first half of 2025, foreign investment in domestic stocks and funds amounted to $10.1 billion, reversing a two-year trend of net reductions [4]. - The net inflow of foreign capital into the domestic stock market increased significantly in May and June, reaching $18.8 billion, reflecting enhanced global capital allocation intentions towards the Chinese market [4]. - The total foreign investment in RMB-denominated bonds has also risen, with foreign holdings exceeding $600 billion, marking a historically high level [4]. Group 2: Cross-Border Capital Flows - The total cross-border income and expenditure of non-bank sectors reached $7.6 trillion, a year-on-year increase of 10.4%, setting a historical record for the same period [4]. - Non-bank sectors experienced a net inflow of $127.3 billion in cross-border funds, continuing the net inflow trend observed since the second half of the previous year, with a 46% quarter-on-quarter increase in the second quarter [4]. Group 3: Foreign Exchange Market Activity - The total trading volume in the domestic RMB foreign exchange market reached $21 trillion in the first half of 2025, reflecting a year-on-year growth of 10.2% [6]. - The trading volumes for spot and derivative transactions were $7.4 trillion and $13.6 trillion, accounting for 35% and 65% of the total trading volume, respectively [6]. Group 4: Foreign Exchange Reserves - As of the end of June 2025, China's foreign exchange reserves stood at $3.3174 trillion, an increase of $115.1 billion from the end of 2024, indicating a stable upward trend in reserves [7]. Group 5: Future Measures by SAFE - SAFE plans to expand innovative pilot policies to more free trade zones across the country, enhancing cross-border trade facilitation and investment openness [9]. - The agency is preparing to eliminate the registration requirement for foreign direct investment reinvestment in China, aiming to streamline processes and reduce operational costs for foreign investors [9]. - SAFE will also increase the borrowing limit for certain innovative enterprises to $20 million, facilitating access to foreign debt [10]. Group 6: Exchange Rate Stability - SAFE has reassured the market regarding exchange rate stability, noting that the RMB's market-based formation mechanism has improved, allowing for timely responses to external pressures [12]. - The RMB appreciated by 1.9% against the USD in the first half of 2025, with fluctuations maintained within a reasonable range, contributing to macroeconomic stability [13].