Economic Development - The core argument suggests that China's economic growth targets should not be based solely on estimates of "potential economic growth rates" due to considerable uncertainty in these estimates [4][5][6] - The estimation of China's potential economic growth rate varies widely among scholars, ranging from 5% to 8%, and there is a lack of official estimates from authoritative government bodies [5][6] - The article emphasizes the importance of using a trial-and-error approach in setting economic growth targets, advocating for expansionary fiscal policies when indicators such as inflation and employment are low [7] - Long-term factors influencing economic performance should not be used to explain short-term economic changes, as many intermediate factors affect current economic growth [8][9] - Macroeconomic regulation and structural reform are not mutually exclusive; both are necessary to address complex economic issues [10][11] - The article discusses the significance of the "Four Trillion Yuan Stimulus Plan" and its long-term effects on China's economic growth and financial stability [17][18] - It highlights the relationship between monetary policy and real estate regulation, noting that fluctuations in monetary policy often correlate with changes in housing prices [29][31] - The article critiques the belief that inflation is always a monetary phenomenon, presenting evidence of instances where inflation rates did not align with monetary supply growth [22][23][24] - It concludes that the lessons learned from over 20 years of macroeconomic regulation in China emphasize the importance of maintaining growth as a fundamental objective [33]

Core Viewpoint - Moody's has maintained China's sovereign credit rating at "A1" with a negative outlook, reflecting a positive assessment of China's economic recovery and stability [1] Economic Performance - Since the fourth quarter of last year, the Chinese government has implemented a series of macroeconomic policies that have led to a rebound in economic indicators, stabilizing market expectations and confidence [1] - The sustainability of debt in the medium to long term has improved, contributing to Moody's decision to keep the credit rating stable [1] Global Economic Context - The global economy is facing multiple challenges, including insufficient momentum, escalating geopolitical conflicts, and instability in international trade [1] - Despite these uncertainties, China's economy has shown a strong start, with stable production and consumption demand, enhancing the stability and coordination of economic operations [1] Future Outlook - A series of incremental and existing policies will continue to work in tandem to support high-quality economic development [1] - China is committed to maintaining confidence and focus on internal matters, regardless of external changes [1]

Core Viewpoint - The Ministry of Finance and the State Taxation Administration announced the resumption of value-added tax (VAT) on interest income from newly issued government bonds, local government bonds, and financial bonds starting from August 8, which may lead to a differentiation in pricing between new and existing bonds [1][2]. Group 1: Impact on Bond Market - The yield on 10-year government bonds fell below 1.7% following the announcement, indicating a market reaction to the new tax policy [1]. - The new policy is expected to reduce the relative allocation value of bond assets in the long term, prompting institutional investors to adjust their asset allocation strategies towards investments with better tax advantages or higher returns [2]. - Existing bonds will continue to be exempt from VAT until maturity, leading to a scarcity premium for these bonds, while new bonds may need to offer higher coupon rates to compensate for the tax burden [2]. Group 2: Implications for Individual Investors - The impact of the new tax policy on individual investors is expected to be minimal, as personal investors can benefit from a VAT exemption for monthly income below 100,000 yuan [2]. - Experts agree that the policy adjustment will not affect ordinary individual investors significantly, as they are less involved in the bond market compared to institutional investors [2]. Group 3: Market Conditions for Tax Resumption - The initial VAT exemption for bond interest was aimed at boosting investor participation and market efficiency, which has been achieved as evidenced by the high subscription rates for local government bonds [3]. - The current market conditions, characterized by robust demand for government bonds, justify the resumption of VAT on bond interest income [3]. Group 4: Fiscal Sustainability and Economic Regulation - The resumption of VAT on bond interest reflects a flexible tax policy adjustment in response to market changes, balancing fiscal sustainability with macroeconomic regulation needs [4]. - The policy aims to address income distribution between the financial sector and other industries, potentially guiding personal investment towards consumption, thereby stimulating economic growth [4]. - The adjustment is seen as a step towards a more unified tax system that reduces distortions in the bond market, aligning capital allocation with risk and return rather than tax incentives [4][5].

Core Viewpoint - The Ministry of Finance and the State Taxation Administration announced the resumption of value-added tax (VAT) on interest income from newly issued government bonds, local government bonds, and financial bonds starting from August 8, which is expected to impact the bond market dynamics and investor behavior [1][2]. Impact on Investors - The new policy is anticipated to have a minimal effect on individual investors, as they can still benefit from a VAT exemption for interest income below 100,000 yuan per month [2][3]. - Institutional investors may adjust their asset allocation strategies in response to the reduced after-tax yields, potentially shifting towards investments with better tax advantages or higher returns [2][3]. Market Conditions for Tax Resumption - The previous exemption from VAT for bond interest income was a key factor in the growth of the bond market, but the current robust market conditions justify the resumption of taxation [3][4]. - The demand for local government bonds has been strong, with subscription multiples often exceeding 20 times, indicating a healthy market environment for the tax policy change [3]. Fiscal Sustainability and Economic Regulation - The resumption of VAT on bond interest income reflects a flexible tax policy adjustment in response to market changes, balancing fiscal sustainability with macroeconomic regulation needs [4][5]. - The policy aims to address income distribution between the financial sector and other industries, potentially redirecting funds from bond investments to consumer spending, thereby stimulating consumption growth [5]. Tax Neutrality in the Bond Market - The new tax policy aims to reduce the tax burden disparity between different types of bonds, promoting a more neutral tax environment in the bond market [5]. - By aligning the tax treatment of government bonds with corporate bonds, the policy supports the principle of tax neutrality and encourages capital allocation based on risk and return rather than tax incentives [5].

Report Summary 1. Report Industry Investment Rating No relevant information provided. 2. Core View of the Report - Tuesday saw a collective decline in the yields of treasury bond cash bonds, with the yields of 1 - 7Y maturities rising by about 0.5 - 1.05bp, and the yields of 10Y and 30Y maturities rising by about 0.50 and 0.45bp to 1.70% and 1.91% respectively. Treasury bond futures closed lower across the board, with the TS, TF, T, and TL main contracts slightly down by 0.02%, 0.03%, 0.11%, and 0.26% respectively. The central bank continued net injections, and the weighted average rate of DR007 dropped to around 1.62%. [2] - Domestically, economic data in April was stable, with retail sales slightly falling, fixed - asset investment shrinking, and industrial growth slightly exceeding expectations, and the unemployment rate improving month - on - month. Financial data was divided, with government bonds supporting social financing, but weak credit due to real estate cooling, end - of - quarter bank impulse, and trade friction. Core inflation improved, but industrial price data was still weak due to international commodities. Exports rebounded unexpectedly due to the export - rush effect under the expectation of tariff friction escalation, and there was a continuous increase in the expectation of fiscal and monetary policies for stable growth. [2] - Overseas, the US S&P Global Composite PMI in May rebounded unexpectedly, and the number of unemployment benefit applicants declined continuously. However, the actual US tariff rate remained at a historical high, and with the recent wavering of US - EU tariff policies, the market was still worried about US inflation, and the Fed's interest - rate cut might be postponed to July. [2] - In terms of strategy, there may still be expectations for a long - term bull market in bonds, but in the short term, due to the phased results of China - US tariff negotiations and the exhaustion of the benefits of interest - rate and reserve - requirement ratio cuts, market risk - aversion sentiment cooled significantly, and the bond market weakened in a volatile manner. Given the significant differentiation in the market, there may be no high - quality short - term trading opportunities, and attention should be paid to the risk of a decline in long - term bonds due to short - term spread correction. [2] 3. Summary by Relevant Catalogs 3.1 Futures Market - **Futures Prices and Volumes**: The closing prices of T, TF, TS, and TL main contracts were 108.735 (-0.11%), 106.030 (-0.03%), 102.408 (-0.02%), and 119.460 (-0.26%) respectively. The trading volumes of T, TF, TS, and TL main contracts were 6265 (up), - 4465 (down), 901 (up), and 3614 (up) respectively. [2] - **Futures Spreads**: All spreads between different contracts of T, TF, TS, and TL showed a downward trend in the change of the spread value, while the spreads between different - maturity contracts such as T06 - TL06, TF06 - T06, etc. showed an upward trend. [2] - **Futures Positions**: The main contract positions of T, TF, TS, and TL all decreased, and the net short positions of T, TS, and TL showed an upward or downward trend, while the net short position of TF decreased. [2] 3.2 Bond Market - **CTD Bonds**: The net prices of some CTD bonds showed an upward or downward trend, such as 250007.IB (down 0.0775) and 2500802.IB (up 0.0001). [2] - **Active Treasury Bonds**: The yields of 1 - year and 7 - year active treasury bonds increased, while the yield of 3 - year bonds decreased, and the yields of 5 - year and 10 - year bonds remained unchanged. [2] 3.3 Interest Rates - **Short - term Interest Rates**: The silver - pledged overnight rate increased by 1.44bp, the Shibor overnight rate decreased by 5.40bp, the silver - pledged 7 - day rate increased by 8.83bp, the Shibor 7 - day rate increased by 1.90bp, the silver - pledged 14 - day rate decreased by 4.00bp, and the Shibor 14 - day rate decreased by 2.10bp. [2] - **LPR Rates**: The 1 - year and 5 - year LPR rates remained unchanged. [2] 3.4 Open Market Operations - The issuance scale of open - market operations was 448 billion yuan, the maturity scale was 357 billion yuan, and the interest rate was 1.4% for 7 - day operations, with a net injection of 9.1 billion yuan. [2] 3.5 Industry News - Moody's maintained China's sovereign credit rating at "A1" with a negative outlook. The Chinese Ministry of Finance believed that this was a positive reflection of China's economic prospects. [2] - The CPC Central Committee General Office and the State Council General Office issued the "Opinions on Improving the Modern Enterprise System with Chinese Characteristics", which proposed measures such as improving the enterprise income distribution system and promoting long - term incentives for listed companies. [2] 3.6 Key Data to Watch - On May 28 at 22:00, the US Richmond Fed Manufacturing Index for May will be released. - On May 29 at 02:00, the Fed will release the minutes of its May monetary policy meeting. - On May 29 at 20:30, the number of initial jobless claims in the US for the week ending May 24 will be announced. [3]

Group 1: Report Industry Investment Ratings - There is no information about industry investment ratings in the report. Group 2: Core Views of the Report - Cotton is under pressure. The current supply of cotton in China is tight, but new cotton in the new year is expected to be abundant, limiting the upside. The future cotton price is affected by the macro - situation, and it is advisable to hedge at the high point of the rebound this year [1]. - PTA is under pressure. With the digestion of macro - benefits, weakening supply - demand expectations, and low buying interest from downstream enterprises, the short - term domestic PTA market may continue to be under pressure [2][3]. - Ethylene glycol moves in a range. Although the cost side has declined and the supply - demand pattern is favorable, the price may correct due to the rapid short - term increase [3]. - Short - fiber moves in a range. The price rebounds due to raw material and supply factors, but considering the off - season and upstream device restart, the price is expected to be strong in the near term and weak in the long term [3]. - Sugar shows a weak oscillation. Internationally, Brazil has a production increase expectation; domestically, factors are mixed, and the sugar price is under pressure [4]. - Apples fluctuate at a high level. The inventory trading is stable, and with low inventory, the price is expected to maintain a high - level range - bound movement [5]. Group 3: Summary by Related Catalogs Cotton - As of the end of April, the commercial inventory was 415 million tons, and the industrial inventory was 95 million tons. By the end of August, the commercial inventory is expected to be 155 million tons, tighter than in 2023. New cotton in Xinjiang is expected to be 7.5 billion tons. The short - and medium - term upside is limited, affected by international negotiations. The future price depends on negotiation results [1]. - On May 26, the China Cotton Price Index was 14,606 yuan/ton, down 2 yuan/ton from the previous trading day; the棉纱 index was 20,500 yuan/ton, down 20 yuan/ton. On May 26, 2025, the total cotton warehouse receipts were 11,691 (+5) sheets [8]. - In April, Argentina exported 3,209 tons of cotton, a decrease of about 9.1% month - on - month and 71% year - on - year. From August 2024 to July 2025, the cumulative export was about 74,000 tons, a decrease of 6.7% year - on - year [8]. - As of May 20, the non - commercial net long positions in ICE cotton futures and options decreased by 12,920; the non - commercial net long positions in futures alone decreased by 11,613; the commodity index fund net long positions increased by 22 [8]. PTA - As of the 20th, the PTA spot price was 4,855 yuan/ton, down 140 yuan. The polyester production cut dragged down sentiment, and the absolute price decreased. The capacity utilization rate rose to 78.38% due to the restart of Sichuan Energy Investment's device, and the downstream polyester industry capacity utilization rate was 89.98%, a decrease of 0.42% from last Friday. The comprehensive supply - demand de - stocking slowed down, and the polyester production and sales rate was 34.1%, a decrease of 1.2% from the previous trading day [2][3]. - As of May 22, the average PTA processing interval was 400.19 yuan/ton, a month - on - month increase of 2.38% and a year - on - year decrease of 2.33%. The domestic PTA weekly average capacity utilization rate reached 77.22%, a month - on - month increase of 1.49% and a year - on - year increase of 5.39% [9]. Ethylene Glycol - The cost side has declined due to the drop in international oil prices. Domestic maintenance has increased significantly, and imports are at a low level. The demand side maintains a high operating rate, but the price may correct [3]. - China's total ethylene glycol capacity utilization rate was 55.38%, a month - on - month decrease of 5.66%. The weekly output was 332,900 tons, a decrease of 9.28% from last week [14]. Short - fiber - The price rebounds due to rising raw materials and reduced supply, but the support from crude oil weakens, and downstream orders are not improving significantly. Considering the off - season and upstream device restart, the price is expected to be strong in the near term and weak in the long term [3]. - As of the 8th, the domestic short - fiber weekly output was 161,400 tons, a month - on - month decrease of 5,500 tons, and the capacity utilization rate was 85.33%, a month - on - month decrease of 2.91%. The average polymerization cost was 5,728 yuan/ton, a month - on - month increase of 0.38%, and the industry cash flow was - 307 yuan/ton, a month - on - month decrease of 86.41% [11]. Sugar - Internationally, Brazil's sugar production in April decreased year - on - year, but there is a production increase expectation. Domestically, factors are mixed, with both supportive and pressure factors [4]. - The USDA expects the global sugar production in the 2025/26 season to increase by 8.6 million tons to 189.3 million tons. The domestic sugar sales quota in May 2025 was 2.35 million tons, the same as last month and down 350,000 tons year - on - year. The 2024/25 sugar - making season in Yunnan ended, and the output is expected to reach a record high of about 2.4 million tons [10][12]. Apples - The inventory trading is stable, with different situations in different regions. The sales in the sales area are okay, and with low inventory, the price is expected to maintain a high - level range - bound movement [5]. - As of May 21, the national main - producing area apple cold - storage inventory was 1.7085 million tons, a decrease of 242,500 tons from last week [13].

Core Viewpoint - The Ministry of Finance views Moody's decision to maintain China's sovereign credit rating at "A1" with a negative outlook as a positive reflection of the improving economic prospects in China, following a series of macroeconomic policies implemented since the fourth quarter of last year [2]. Group 1 - The Chinese government has implemented a comprehensive set of macroeconomic policies that have led to a recovery in economic indicators, stabilizing market expectations and confidence, and enhancing the long-term sustainability of debt [2]. - Despite global economic challenges such as insufficient momentum, geopolitical conflicts, and instability in international trade, China's economy has shown a strong start with high-quality development, stable production, and rising consumer demand [2]. - The Ministry of Finance emphasizes that a series of incremental and existing policies will continue to work together to support high-quality economic development, regardless of external changes [2].

Core Viewpoint - China does not resort to selling US Treasury bonds as a countermeasure against the US due to its significant foreign exchange reserves and the potential risks associated with such actions [1][5][6]. Group 1: China's Economic Position - As of early 2025, China holds $784.3 billion in US Treasury bonds, equivalent to approximately 5.65 trillion RMB at an exchange rate of 1:7.2 [3][4]. - China's foreign exchange reserves stand at $3.2 trillion, with over half in US dollar assets, primarily in the form of US Treasury bonds [4][5]. Group 2: Reasons for Holding US Treasuries - Foreign exchange reserves are crucial for stabilizing the currency and managing macroeconomic conditions, especially during times of pressure on the RMB [5][6]. - Selling off large amounts of US Treasuries could lead to a significant drop in their prices, adversely affecting China's own financial position [5][6]. Group 3: Future Considerations - While China has been gradually reducing its holdings of US Treasuries since their peak of $1.2 trillion in 2020, it is unlikely to completely divest from them in the near future [6][7]. - A large-scale sale of US Treasuries by China would only occur under extreme circumstances, such as a loss of confidence in the US dollar or significant political issues [7][8].