Report Industry Investment Rating - The report does not explicitly provide an investment rating for the industry. Core Viewpoints - In August, the three major PMI indices showed marginal improvements, but the manufacturing PMI remained below the boom-bust line. The overall expansion of enterprise production and business activities accelerated slightly, and the endogenous economic momentum continued to improve. However, the manufacturing PMI still needed continuous repair, and there was a risk of increased economic downward pressure in the second half of the year. Short-term bond markets might be suppressed by sentiment, but the bond market was expected to rise in September [2]. Summary by Related Content Manufacturing PMI - In August, the manufacturing PMI rose 0.1 pct month-on-month to 49.4%, staying below the boom-bust line for five consecutive months. The production and demand-related indices improved, and the price indices continued to rise, though the marginal increase weakened. The PMI of consumer goods industries decreased by 0.3 pct to 49.2%. The new export orders index and the import index were 47.2% and 48.0% respectively, up 0.1 pct and 0.2 pct month-on-month, indicating a possible improvement in foreign trade [2]. - The business climate of different types of enterprises continued to diverge. The PMIs of large and small enterprises increased by 0.5 pct and 0.2 pct respectively, reaching 50.8% and 46.6%. The small enterprises had been in the contraction range for 16 consecutive months. The PMI of medium-sized enterprises dropped 0.6 pct to 48.9% [2]. Non - manufacturing PMI - In August, the non-manufacturing business activity index was 50.3%, up 0.2 pct month-on-month. The non-manufacturing business climate had been at or above the critical point since January 2023, remaining relatively stable. The construction business activity index was 49.1%, down 1.5 pct month-on-month, possibly due to natural factors such as high temperatures and heavy rains. The service business activity index was 50.5%, up 0.5 pct month-on-month, reaching the highest value this year. The business activity expectation index remained at a relatively high level of 57.0%, up 0.4 pct month-on-month, indicating that enterprises were optimistic about the market outlook in September [2]. Economic Outlook and Bond Market - The economic negative cycle of "plummeting housing prices, plummeting stock markets - shrinking wealth - consumption downgrade" in the past two years might come to an end. However, there was still pressure on profit improvement, and the manufacturing PMI below the boom-bust line in August reflected growth pressure. Consumption and exports might face certain pressures in the second half of the year [2]. - The short-term bond market might be suppressed by sentiment, but the bond market was expected to rise in September. The economic downward pressure in the second half of the year might increase, and the central bank's continuous easing and banks' self - operated allocation needs provided support. After September, the net issuance of government bonds was expected to be no more than 25% of the annual plan, and the interest rate bonds might have a repair window. The report continued to be bullish on the 10Y treasury bond yield in the second half of the year, which was expected to be between 1.6% - 1.8%, and the 10Y treasury bond was considered to have high cost - effectiveness at around 1.8%. It was expected that the 10Y treasury bond yield would return to around 1.65% in the next six months, and the 5Y secondary capital bonds of state - owned and joint - stock banks would fall below 1.9% [2].

Economic Overview - In the first half of 2025, China's economy demonstrated strong resilience with a GDP growth of 5.3% year-on-year, supported by consumption contributing 52.3% to economic growth [2][7][8] - The second quarter GDP growth was 5.2% year-on-year and 1.1% quarter-on-quarter, indicating a steady progress in economic performance [2][7] - The GDP deflator index has been negative for nine consecutive quarters, with a value of -1.0% in Q2 2025, while CPI turned positive for the first time in four months at +0.1% in June [2][7][8] Pharmaceutical Sector China Biologic Products (01177.HK) - The company announced a $500 million acquisition of 95.09% of Shanghai Lixin Pharmaceutical, which will enhance its core competitiveness in the oncology field through Lixin's differentiated dual-antibody and ADC technology platforms [10][11][13] - The acquisition is expected to significantly boost the company's capabilities in developing innovative drugs, with several promising candidates in clinical trials [12][13] Sinovac Biotech (688136.SH) - The company has established multiple leading technology platforms for innovative drug development, focusing on oncology and degenerative diseases, which are expected to enhance its valuation [15][16] - The innovative pipeline includes promising candidates that are anticipated to provide new valuation flexibility for the company [17][18] Precision Manufacturing Sector Easy Precision (836221.BJ) - The company reported a revenue of 80 million yuan and a net profit of 15.04 million yuan in Q1 2025, with a focus on precision metal components for the automotive industry [20][21] - Easy Precision is expanding its product line through strategic partnerships and is set to launch a third-generation welding ring production line in 2025, enhancing its market competitiveness [21][22] - The company plans to acquire a 51% stake in Tongyihe to enhance its precision stamping capabilities and drive the localization of harmonic reducer components [23][25]