Summary of Conference Call Industry or Company Involved - The discussion primarily revolves around the M1 monetary supply in the context of the Chinese economy Core Points and Arguments - M1 growth has shown significant volatility, with a decline from 3.3% in January to -3.3% by September 2024, before rebounding to approximately 1.2% in December 2024, indicating a potential new trend in M1 growth [1][2][3] - The fluctuations in M1 growth are attributed to two main factors: the Spring Festival effect and fiscal policy impacts, which include government spending and issuance [2][4] - The new calculation method for M1 includes additional components such as non-bank deposits and household demand deposits, which were not part of the old calculation, thus affecting the growth metrics [2][3][4] - The average growth rate of M1 from 2018 to the present is around 3-4%, significantly lower than the pre-2018 levels, which were driven by real estate and household purchases [5][10] - The contribution of fiscal policy to M1 growth has increased, reaching approximately 7-8 percentage points in 2024, while the impact of the financial system has been declining [10][12] - The relationship between government bond issuance and M1 growth indicates that M1 typically rises 2-4 months after significant bond issuance, reflecting the effective use of fiscal funds [13][14] Other Important but Possibly Overlooked Content - The new M1 calculation method has led to a more pronounced decline in growth rates during the Spring Festival, with a drop of about 1 percentage point compared to the old method [4] - The financial system's contribution to M1 growth has been weakening, suggesting a shift in how monetary policy impacts M1 [10][12] - The anticipated fiscal measures, particularly the issuance of special local government bonds, are expected to play a crucial role in boosting M1 growth in 2025, although the scale of issuance may not match previous years [14][15]

Investment Rating - The report indicates a positive outlook for M1 growth, suggesting a potential upward trend in the coming quarters [11][35]. Core Insights - M1 growth showed a rebound trend in Q4 2024, but experienced a decline again in early 2025 due to the Spring Festival effect. The report explores the factors driving M1 growth changes and whether a new upward trend has begun [11][35]. - The report identifies five key factors influencing M1 growth: fiscal policy, monetary policy, entity activity, financial system, and external factors. It highlights that fiscal policy has become the primary driver of M1 growth, especially in 2024 [20][35]. - The report emphasizes that the contribution of entity demand to M1 growth has weakened significantly since 2018, while fiscal policy's contribution has increased, reaching 7.3 percentage points in 2024 [35][41]. Summary by Sections 1. Changes in M1 - M1 growth rebounded starting October 2024, reaching 1.2% in December, but slowed to 0.4% in January 2025. The government bond issuance accelerated from August 2024, contributing to M1's recovery [11][12][35]. - The new M1 calculation includes personal demand deposits, which smooths out the impact of seasonal factors like the Spring Festival [11][13][35]. 2. Factors Driving M1 Growth: Insights from the Five-Factor Model - The report notes that the average annual contribution of entity demand to M1 growth has dropped to 2.2 percentage points in 2024, compared to an average of 10 percentage points from 2018 to 2021 [20][35]. - The financial system's contribution to M1 growth has been negative in recent years, reflecting the drag from interbank fund circulation [35][41]. 3. Is M1 Entering an Upward Cycle? - Historical data shows that M1 growth has typically rebounded significantly during previous cycles, with increases of over 10 percentage points lasting more than a year [41][45]. - The report suggests that while fiscal policy may drive M1 growth, the current recovery in entity demand remains weak, and the central bank's monetary policy focus is on stabilizing bank interest margins rather than large-scale liquidity injections [45][49].