1. Report Industry Investment Rating No information provided in the document. 2. Core Viewpoints of the Report - The Ministry of Finance emphasizes expanding domestic demand, investing in people, and open sharing in fiscal policies during the 14th Five - Year Plan period, aiming to promote high - quality economic development [8]. - Hunan Xiangxi Prefecture has achieved zero implicit debt at the prefecture - level, with 77 out of 97 financing platforms exiting, indicating significant progress in debt resolution [12]. - The issuance scale and net financing scale of local government bonds have increased, and the progress of new bonds has exceeded 20%, accelerating compared to the same period last year. The issuance scale of urban investment bonds has risen, and the net financing scale has turned to zero [19][22]. 3. Summary According to Relevant Catalogs 3.1. News Comments - **China Development Forum Emphasizes Fiscal Policy Focus**: The forum emphasizes that fiscal policies in the 14th Five - Year Plan period will focus on expanding domestic demand, investing in people, and open sharing. To expand domestic demand, efforts will be made to boost consumption and expand effective investment. To invest in people, support will be increased, implementation entry - points will be identified, and relevant policies will be improved [8][11]. - **Hunan Xiangxi Prefecture's Debt Resolution**: The state - level implicit debt in Hunan Xiangxi Prefecture has been cleared, and 77 out of 97 financing platforms have exited. In 2025, interest expenses were reduced by 2.8 billion yuan, 42 financing platforms were reduced and exited, and the task of repaying overdue enterprise accounts was over - fulfilled. The state - owned enterprises' "three capitals" were effectively revitalized, with an income of 3.45 billion yuan [12][13]. - **Tracking of Urban Investment Enterprises' "Exit from Platform"**: This week, 14 urban investment enterprises declared to become market - oriented business entities or exit the financing platform list. Since October 2023, a total of 1,084 enterprises have made such declarations, mainly in eastern provinces, with AA + level as the main body rating and district - county level as the main administrative level [15]. - **Early Redemption of Bonds by Urban Investment Enterprises**: This week, 26 urban investment enterprises redeemed bond principal and interest in advance, involving 27 bonds with a total scale of 4.705 billion yuan, a decrease of 1.295 billion yuan compared to the previous value [17]. - **Cancellation of Bond Issuance**: The issuance of the urban investment bond "26 Liujian 03" was cancelled this week, with a scale of 899 million yuan [18]. 3.2. Issuance of Local Government Bonds and Urban Investment Enterprise Bonds - **Local Government Bonds**: This week, 73 local government bonds were issued, with a total issuance scale of 342.234 billion yuan, a 152.49% increase from the previous value, and a net financing of 213.822 billion yuan, a 230.80% increase. As of March 22, the outstanding local government bond scale was 56.91 trillion yuan. The issuance of new bonds has completed 24.67% of the annual quota, and 45.07% of the 2 - trillion - yuan replacement quota has been issued [19]. - **Urban Investment Bonds**: This week, 210 urban investment bonds were issued, with a total issuance scale of 150.265 billion yuan, an 8.27% increase from the previous value, and a net financing of 0 yuan. As of March 22, the outstanding urban investment bond scale was 14.20 trillion yuan. The overall issuance interest rate of urban investment bonds was 2.06%, a 3.77 - BP decrease from the previous value, and the issuance spread was 60.91 BP, a 4.77 - BP decrease [22]. 3.3. Trading of Local Government Bonds and Urban Investment Enterprise Bonds - **Central Bank's Open - Market Operations and Fund Prices**: The central bank conducted 242.3 billion yuan of reverse repurchase operations this week, with 176.5 billion yuan of reverse repurchases maturing. After considering the 250 - billion - yuan treasury cash fixed - term deposit, the net investment was 315.8 billion yuan. Short - term fund interest rates fluctuated, with overnight and one - week SHIBOR decreasing by 0.20 BP and 4.00 BP respectively, and two - week SHIBOR increasing by 2.80 BP [28]. - **Urban Investment Enterprise Credit Rating Adjustment**: On March 16, Zhongchengxin International upgraded the credit rating of Zhangjiagang Economic Development Zone Holding Group Co., Ltd. from AA + to AAA, with the bond rating unchanged and the outlook remaining stable [28]. - **Local Government Bonds**: This week, the spot trading volume of local government bonds was 468.086 billion yuan, an 8.58% decrease from the previous value. The maturity yields of local government bonds fluctuated, with an average increase of 1.33 BP [28]. - **Urban Investment Bonds**: This week, the trading volume of urban investment bonds was 302.805 billion yuan, a 10.26% increase from the previous value. The maturity yields of urban investment bonds mostly decreased, with an average decrease of 2.03 BP. The spreads of 1 - year and 5 - year AA + urban investment bonds narrowed by 0.29 BP and 0.88 BP respectively, while the spread of 3 - year AA + urban investment bonds widened by 0.64 BP [29]. - **Abnormal Trading of Urban Investment Bonds**: This week, 7 bonds of 6 urban investment entities had 10 abnormal trades, with a decrease in the number of entities, bonds, and abnormal trades compared to the previous value [29]. 3.4. Important Announcements of Urban Investment Enterprises This week, 34 urban investment enterprises issued announcements regarding changes in senior management, legal representatives, directors, supervisors, etc., changes in controlling shareholders and actual controllers, equity/asset transfers, changes in the use of raised funds, and name changes [32].

Investment Rating - The report maintains an "Outperform" rating for the social services sector, indicating expected performance above the market index by over 10% [4][24]. Core Insights - The tourism market is experiencing a strong recovery, with significant increases in ticket and hotel bookings during the Qingming holiday, showing a year-on-year growth of over 70% for ticket bookings and approximately 40% for hotel bookings [2][16]. - The report highlights the government's initiatives to boost domestic demand, which are expected to support the valuation recovery of the social services sector [4][24]. - The introduction of spring and autumn breaks in schools, such as in Hunan province, is anticipated to further stimulate family travel demand [2][17]. Summary by Sections Market Review - The consumer services sector saw a decline of 3.75% during the reporting period, underperforming the market by 0.18 percentage points [11][12]. - Notable stock performances included gains from companies like Helen's (7.14%) and New Oriental-S (6.32%), while stocks like Xiaobai (13.33%) and Haidilao (-8.87%) faced declines [12][15]. Industry and Company Dynamics - The report notes a significant increase in travel bookings, with popular destinations like Shanghai and Beijing leading the way, and niche locations like Hainan and Xinjiang seeing over 100% growth in bookings [2][16]. - Regulatory changes are being implemented to enhance food safety in online dining, and a new long-term care insurance system is being established to support the elderly care industry [2][18]. Investment Recommendations - The report suggests a focus on companies such as China Duty Free, Sanchuan Tourism, Huazhu Group-S, and others, indicating a favorable outlook for these stocks in the current economic environment [4][24]. - Mid-term investment preferences include Meituan-W, Mxue Group, and Ctrip Group-S, among others, reflecting a diverse range of opportunities within the sector [4][24]. Hong Kong Stock Connect Holdings - Key stocks in the social services sector, including Haidilao and Mxue Group, saw increases in their holding percentages during the reporting period, indicating positive investor sentiment [3][23].

1. Report Industry Investment Rating - Not provided in the content 2. Core Viewpoints of the Report - The trend direction of A-shares in the second quarter has high uncertainty. Whether the stock index can strengthen again depends on two key signals: a significant increase in the Fed's interest rate cut expectation and the continuous recovery of domestic consumption. If neither signal appears, the stock index is expected to maintain a sideways shock pattern. The structural market of the stock index in the second quarter is better than the trend market, and the CSI 300 index is expected to outperform small and medium-cap stock indexes and become the core allocation direction of the market [2][29]. 3. Summary by Relevant Catalogs 3.1 Peripheral Disturbance and the Accumulation Transition Period - The A-share market in the first quarter of 2026 can be divided into three stages. By March 24, 2026, the cumulative increases and decreases of the four major stock indexes in the first quarter were: CSI 300 index -3.35%, SSE 50 index -6.61%, CSI 500 index 1.77%, and CSI 1000 index 0.07%. Since March, the basis of stock index futures has continued to deepen, indicating a downturn in market sentiment [4]. - The market in the first quarter was dominated by the expectation of policy benefits from the Two Sessions and changes in liquidity expectations under peripheral shocks. The release of the 15th Five-Year Plan and the Two Sessions enhanced policy signals and provided support for the stock index. The nomination of the next Fed chairman and the escalation of the Middle East conflict affected liquidity expectations and led to market adjustments [6]. 3.2 Reversal of the Medium - to - Long - Term Logic? 3.2.1 Geopolitical Risks and the Slowdown of the Fed's Interest Rate Cut - The Fed's March interest rate meeting sent a hawkish signal, maintaining the federal funds rate target range at 3.5% - 3.75%, raising GDP and inflation expectations, and indicating a slower interest rate cut rhythm. The Fed is unlikely to switch to raising interest rates this year, and the impact on A-shares is mainly a phased tightening of liquidity expectations, without changing the long - term global liquidity easing trend [9][14]. 3.2.2 Domestic Liquidity and Policy Support - By comparing with the stagflation environments in 2011 and 2021, it is believed that the current situation is more comparable to 2021, and the possibility of tightening the domestic monetary policy this year is low. The 15th Five - Year Plan focuses on boosting consumption and expanding domestic demand, and the domestic policy and liquidity provide double support, making the medium - to - long - term positive logic of A - shares unchanged [15]. 3.3 Uncertain Trend, Promising Structure 3.3.1 Strong Drivers Needed for the Stock Index to Strengthen - The two previous upward trends of A - shares were driven by strong policy stimuli or loose liquidity expectations. In the second quarter, it is less likely for policies and liquidity to become strong drivers again. The substantial recovery of the domestic fundamentals, especially the recovery of the consumption end, will be the key for the stock index to strengthen again [18][22]. 3.3.2 Structure More Promising than Trend - In the second quarter, the structural opportunities of the stock index are more certain than the trend - restarting opportunities. The market style will tilt towards large - cap blue - chip stocks, especially the CSI 300 index. The CSI 300 index has advantages in valuation, policy benefits, and defense, and is expected to be the core allocation main line in the second quarter [24][26]. 3.4 Market Outlook and Strategy Recommendations - In the second quarter, the trend of A - shares is uncertain. Pay attention to the Fed's interest rate cut expectation and domestic consumption recovery. The structural market is better than the trend market, and the CSI 300 index is expected to outperform [29]. - Trend strategy: Wait and see, and act opportunistically. Track the Fed's interest rate cut expectation and domestic consumption data, and buy on dips if there are positive signals; otherwise, maintain a light position [29]. - Arbitrage strategy: Recommend a long - IF and short - IM cross - variety arbitrage combination [30]. - Option strategy: Sell wide - straddle options to earn time - value income [30].

Summary of Key Points from the Conference Call Industry or Company Involved - The conference call discusses the 2026 Government Work Report and the "14th Five-Year Plan" (十四五) development strategy, focusing on macroeconomic policies and their implications for various sectors in China. Core Points and Arguments 1. **Economic Growth Target**: The report sets a GDP growth target of 4.5% to 5% for 2026, aiming to connect with the long-term goal of doubling per capita GDP by 2035, ensuring a growth floor to avoid economic downturns [5][13][22]. 2. **Macroeconomic Policy Shift**: The macro policy is shifting towards a "more proactive" fiscal policy and "moderately loose" monetary policy, with expectations for interest rate cuts and a focus on supporting consumer spending through long-term bonds [1][8][22]. 3. **Focus on New Quality Productivity**: The concept of "new quality productivity" is emphasized as a core driver of economic growth, with 28 out of 109 major projects related to this theme, highlighting its importance in the "14th Five-Year Plan" [1][4][10]. 4. **Domestic Demand Strategy**: The strategy focuses on "investing in people," enhancing income for low-income groups, improving social security, and issuing consumption vouchers to stimulate demand and counter deflation [1][9][11]. 5. **Risk Prevention**: The report emphasizes a shift from emergency responses to long-term institutional risk management, particularly addressing risks in real estate, local government debt, and small financial institutions [1][19]. 6. **Regional Economic Differentiation**: The report outlines a differentiated industrial layout, with the eastern region focusing on AI and institutional openness, while the central and western regions are set to absorb industrial transfers [1][23]. 7. **External Environment Challenges**: The report acknowledges geopolitical risks and uncertainties in U.S. and Japanese monetary policies, shifting from passive responses to proactive support for enterprises in optimizing global layouts [1][16]. Other Important but Possibly Overlooked Content 1. **Employment and Price Stability**: The employment target is set at over 12 million new urban jobs, with an urban unemployment rate around 5.5%, reflecting a commitment to maintaining social stability [5][13]. 2. **Environmental Goals**: The report aims to reduce carbon emissions per unit of GDP by 3.8%, exceeding the previous target, indicating a stronger commitment to ecological sustainability [6][13]. 3. **Fiscal and Monetary Policy Evolution**: The fiscal policy has evolved from a focus on quality and sustainability to a more aggressive stance, while monetary policy has shifted to a more flexible and supportive approach [14][22]. 4. **Differentiated Development Strategies**: The report proposes tailored strategies for different regions and market entities, emphasizing the need for traditional industries to upgrade and high-tech sectors to integrate into national innovation chains [23][24]. 5. **Implementation and Supervision Mechanisms**: A comprehensive system for policy implementation, supervision, and expectation management is established to ensure effective policy execution and to address potential internal and external constraints [14][24].

Core Viewpoint - Expanding domestic demand is a strategic foundation for China's long-term economic growth and a key focus of current macroeconomic policies [2][5]. Group 1: Review of Domestic Demand in 2025 - In 2025, the top six provinces achieved a total retail sales of consumer goods of 23.2 trillion yuan, accounting for 46.3% of the national total, an increase of 1.3 percentage points from 2021 [7]. - Service consumption showed high growth overall, with only Henan experiencing a decline in service expenditure share among the six provinces [7]. - Fixed asset investment saw rare negative growth, with only Henan achieving positive growth; however, structural highlights emerged, particularly in equipment upgrades and high-tech industry investments [7]. Group 2: Policy Orientation for 2026 - The policy focus for 2026 has shifted from "stabilizing growth and expanding total volume" to "expanding growth space and tapping economic potential" for long-term structural optimization [3][14]. - The approach has transitioned from demand-side stimulation to supply-demand coordination, emphasizing supply upgrades and scenario innovation to drive demand release [3][14]. - The 2026 policies reflect three major changes in promoting consumption: deepening policy implementation, scenario-based consumption, and precision targeting of consumer groups [3][14]. Group 3: Investment Expansion Trends - Investment goals are now emphasizing project quality and investment efficiency while maintaining high investment intensity, with a focus on "government investment process management" as a key reform direction [4][36]. - The investment structure is increasingly optimized, with new infrastructure, industrial investments, and "investment in people" becoming important sources of stable investment [4][36]. - There is a growing emphasis on collaboration between government investment and private capital, expanding private sector participation and enhancing project implementation capabilities [4][36]. Group 4: Insights on Consumption Promotion - The "Two New" policy is central to boosting consumption, with a focus on enhancing ecological and usage aspects of consumption rather than merely expanding the scale [18][20]. - Scenario-based consumption is gaining traction, integrating consumption behaviors into specific life scenarios to stimulate service consumption potential [20][21]. - Targeting different demographic groups based on age and consumption patterns is crucial for activating domestic demand, with tailored services for each group [25][31]. Group 5: Investment Quality and Structure - The investment strategy for 2026 emphasizes quality, efficiency, and sustainability, moving away from merely expanding scale [36][42]. - New infrastructure investments are highlighted as a key growth area, with a focus on digital and clean energy infrastructure [45][46]. - The investment focus is also extending to human development, with increased public resources directed towards education, healthcare, and elderly care [46].

Group 1 - The core viewpoint of the article emphasizes the importance of integrating investment in physical assets and human capital to drive economic growth and modernization in China [3][4]. - The article highlights that this integration is a key measure to implement Xi Jinping's thought on socialism with Chinese characteristics for a new era, marking a significant shift in investment logic and development paradigms [3][4]. - The upcoming special issue of "Tsinghua Financial Review" aims to explore how to synergize investments in "things" and "people" to build a high-quality investment system that supports China's transition to an innovation-driven and people-centered modernization path [3][4]. Group 2 - The article outlines several submission topics for the special issue, including the theoretical, experiential, and path integration of "investment in things" and "investment in people" [5]. - It also discusses the construction of new financial service models that balance investments in both physical and human capital [5]. - The article addresses the transformation of economic growth paradigms under the framework of closely integrating investments in physical and human resources, aiming to expand domestic demand and enhance effective investment [5].

Core Viewpoint - The article discusses the insights of Zhu Feng, Chief Economist of JPMorgan China, regarding China's economic outlook, focusing on the GDP growth target for 2026, the importance of domestic demand, and the impact of international geopolitical conflicts on the economy [1][3]. Economic Growth Target - The GDP growth target for 2026 is set at a range of 4.5% to 5%, which reflects a downward adjustment from the previous year, aligning with the current economic realities and allowing for greater policy flexibility [3][4]. - Zhu Feng emphasizes that the adjustment is a recognition of the economic characteristics during the transformation phase, which often accompanies a slowdown in growth [4]. Domestic Demand and Consumption - Expanding domestic demand has been prioritized in government reports for two consecutive years, indicating a deepening understanding of the importance of consumption [5][6]. - The government aims to boost consumption through supportive policies, although challenges remain in achieving significant short-term impacts [5][6]. Effective Investment and Export - Effective investment is showing positive trends, particularly in infrastructure related to the "14th Five-Year Plan," which is expected to support economic growth alongside exports [4][5]. - Zhu Feng notes that while external demand remains a crucial growth engine, effective investment is becoming increasingly important in stabilizing the economy [4]. Fiscal Policy Insights - The fiscal policy for this year is expected to remain expansionary, with a focus on investment, particularly in projects related to the "14th Five-Year Plan" [5][6]. - Zhu Feng highlights that while direct measures to stimulate consumption exist, such as the 250 billion yuan for trade-in subsidies, the market anticipates more robust fiscal policies in the consumption sector [5][6]. International Trade and Geopolitical Impact - Zhu Feng points out that the government is increasingly aware of the need for balanced international trade in light of external pressures and uncertainties [6]. - The recent geopolitical tensions, particularly the U.S.-Iran conflict, have led to rising oil prices, but the direct impact on China is limited due to its diversified energy sources [8][9]. Oil Price Dynamics - The article discusses the potential implications of rising oil prices, with Zhu Feng estimating that a sustained increase could lead to a 0.8 percentage point rise in global inflation, affecting global consumption and production [9]. - Despite the challenges posed by high oil prices, Zhu Feng expresses confidence in China's ability to respond effectively through fiscal policy, even with limited monetary policy space [9].

Interest Rate Spread Overview - Since 2026, the bond market has performed well, with yields on government bonds and short-term notes generally declining[2] - The credit spread for short-term notes has narrowed, with changes mostly between 1-11 basis points (bp)[2] - The highest industry spread is in the real estate sector at 107bp, which expanded by 17bp due to the Vanke incident[2][9] - Other sectors with spreads above 45bp include information technology, agriculture, wholesale and retail, coal, and pharmaceuticals[2][9] Investment Strategy Insights - The government work report emphasizes structural opportunities in policy-supported sectors, particularly in consumption and technology innovation[3][4] - The report highlights the need to accelerate the cultivation of new consumption growth points, focusing on cultural tourism, events, and health care[3] - The commercial and personal services sector has a current spread of around 30bp, indicating potential for compression[3][10] - Continuous support for real estate policies is expected, with a focus on stabilizing market expectations and risk mitigation[5][7] Market Dynamics - The real estate sector's sales area decreased by 8.7% year-on-year, indicating ongoing pressure on sales[7] - The bond market sentiment has been affected by the outflow of technology innovation bonds (Tech Bonds), with a total reduction of 88.8 billion yuan as of March 11[6][10] - The spreads for AAA-rated industries are mostly compressing, while the real estate sector's spread has notably widened[17][23]

Investment Rating - The report maintains a "Neutral" rating for the light industry manufacturing and textile apparel sectors [8][47] - Specific companies such as Oppein Home (603833), Sophia (002572), Explorer (300005), Semir Apparel (002563), Guibao Pet (301498), and Zhongchong Co. (002891) are rated as "Buy" [8][47] Core Insights - In January and February 2026, the total retail sales of social consumer goods increased by 2.8%, with furniture sales growing by 8.8% and clothing, shoes, and textiles by 10.4% [15][47] - The government continues to prioritize consumption enhancement initiatives, with a special bond of 250 billion yuan allocated to support the replacement of consumer goods [47] - The report highlights the resilience of the home furnishing industry, supported by improving real estate expectations and consumption policies [47] Industry News - The report notes that the retail sales of social consumer goods reached 860.79 billion yuan in January and February 2026, with a year-on-year growth of 2.8% [15] - The report mentions that the price of corrugated paper continues to rise, with the latest price increase announced by Nine Dragons Paper [16] - The report indicates that the light industry manufacturing sector underperformed the CSI 300 index by 1.28 percentage points, while the textile apparel sector underperformed by 3.24 percentage points during the week of March 16 to March 20 [5][40] Company Announcements - Jian Sheng Group plans to implement an employee stock ownership plan for 329 employees, involving 609,500 shares [40] - Shengxing Co. reported a 27.44% year-on-year decline in net profit attributable to shareholders for 2025 [40]

Summary of Key Points from the Conference Call Industry Overview - The macroeconomic outlook for China indicates a significant supply-demand imbalance, with strong supply but relatively weak domestic demand. Policy adjustments will focus on increasing quality consumption supply, reducing inefficient investments, promoting consumer welfare, and addressing debt issues, which will impact various industries differently [1][4]. Core Insights and Arguments - **Economic Growth Projections**: China's economy is expected to grow by approximately 5% in 2026, with inflation anticipated to be higher than in 2025. This suggests that nominal growth will outperform this year, positively influencing secondary market investments. Structural opportunities will primarily be found in technology and consumption sectors, driven by both economic and cultural factors [3]. - **Export Performance**: Exports in 2025 exceeded expectations, and growth in 2026 is projected to be at least as high as this year, potentially exceeding 6%. The share of exports to emerging markets is increasing, while direct exports to the U.S. are declining, although overall dependency is rising. Despite falling export prices, corporate profit margins are stabilizing due to technological advancements and cost reductions [5][13]. - **Weak Domestic Demand**: The primary reasons for weak domestic demand are the transformation of the real estate sector and heavy debt burdens, which have adversely affected the income of businesses, governments, and households. This situation is reflected in accounts receivable and payable metrics, indicating potential risks [6]. - **"Anti-Involution" Policy**: This systemic initiative differs from historical capacity reduction measures and will intensify in certain sectors such as glass, chemicals, photovoltaics, non-ferrous metals, and coal in 2026. This indicates that structural opportunities will increasingly manifest in specific industries [7]. - **Economic Policy Trends**: The economic policy for 2026 will continue a trend of moderate acceleration, focusing on increasing quality consumption supply and reducing inefficient supply. This approach has been emphasized since the 2022 strategic planning outline and the 2025 "14th Five-Year Plan" [9][8]. Important but Overlooked Content - **Sectors to Watch**: Key areas for increasing quality consumption supply include yachts, private jets, automobiles, and services in sports and high-end healthcare. Inbound consumption is also significant. Collectively, these sectors represent about 3% of 2024's GDP, with a potential growth of 10%, translating to a 0.3 percentage point increase in GDP [10]. - **Fiscal Policy Measures**: The overall fiscal deficit rate is expected to rise, including a narrow deficit rate of 3%-4% and a broader fiscal support rate. Adjustments in the use of special bonds aim to enhance efficiency, with the 2025 special bond scale at 4.4 trillion yuan, indicating a shift in usage compared to previous years [11]. - **Monetary Policy Expectations**: The monetary policy is expected to remain accommodative in 2026, with interest rate cuts likely and sufficient room for reserve requirement ratio reductions compared to 2025 [12]. - **Investment and Consumption Outlook**: Investment is anticipated to improve slightly next year due to moderate increases and structural adjustments. Consumption levels are expected to remain stable, supported by policies like trade-in programs and increased social welfare spending, alongside enhanced quality consumption supply. Export expectations are optimistic, with a projected growth of 6% or higher, aided by easing U.S.-China trade tensions and advancements in Chinese technology [2][13]. - **Potential Growth Space**: China's potential growth rate exceeds 5%, indicating substantial growth opportunities. With sufficient policy support, higher growth can be achieved. Overall, a combination of supply-side and demand-side measures will allow the economy to reveal more positive aspects, with significant development opportunities across various sectors [14].