Investment Rating - The report maintains an "Outperform" rating for the banking sector, emphasizing the potential for high dividend stocks and the need for growth stocks to wait for further macroeconomic improvements or policy support [7]. Core Insights - The overall credit quality of Chinese residents is manageable, with a focus on the potential for retail non-performing loans to peak around 2026, particularly in personal business loans and consumer loans [6][8]. - The report highlights the differences in debt burdens between Chinese and American residents, noting that while the U.S. has a healthier cash flow statement, China's asset-liability structure is more robust [61]. Summary by Sections 1. Comparison of Debt Burdens - As of September 2024, the leverage ratios for China and the U.S. are 60.1% and 70.5% respectively, with China's total household credit approximately 60% of the U.S. total [5][27]. - The debt-to-disposable income ratio for China is significantly higher at 141.5% compared to the U.S. at 95.0%, indicating greater repayment pressure on Chinese households [27][40]. 2. Current State of Retail Credit in China - Retail credit growth has slowed significantly since 2022, with year-on-year growth rates of 5.1%, 5.1%, and 3.9% for 2022, 2023, and 2024 respectively [67]. - By the end of 2024, the proportion of retail credit in total loans for listed banks has decreased to 35.7%, down 5.8 percentage points from 2021 [72]. 3. Quality of U.S. Resident Loans - U.S. household loan default rates are rising but remain at manageable levels, with the current risk being overall controllable [5][8]. - The report notes that the U.S. household cash flow statement is currently at its best level since the subprime crisis, indicating no excessive borrowing [3][61]. 4. Investment Recommendations - The report suggests focusing on high-dividend stocks in the short term while waiting for growth stocks to benefit from potential macroeconomic improvements or policy changes [7][8]. - It emphasizes the importance of selecting individual stocks based on risk management, customer quality, and non-performing loan disposal efforts, as these factors will vary significantly among banks [8].