Fiscal Performance - General fiscal expenditure cumulative year-on-year growth reached 9.3%, aligning with the annual budget level[3] - General fiscal revenue for January to July was 13.6 trillion yuan, a year-on-year increase of 0.1%, while expenditure was 16.1 trillion yuan, up 3.4%[6] - In July, general fiscal revenue increased by 3.4% year-on-year, while expenditure decreased by 12.4%[9] Revenue and Taxation - Tax revenue has shown positive year-on-year growth for four consecutive months, with July's tax revenue increasing by 4.6%[9] - Major tax categories such as VAT, consumption tax, corporate income tax, and personal income tax grew by 4.3%, 5.4%, 6.4%, and 13.9% respectively[9] - Non-tax revenue saw a decline, with July's non-tax revenue down 12.4% year-on-year[9] Expenditure Trends - Social security, health, and education expenditures increased significantly, with year-on-year growth rates of 13.1%, 14.2%, and 4.6% respectively[9] - Infrastructure spending has been reduced, with traditional infrastructure sectors showing negative growth[9] - Debt interest payments rose to 8.9% year-on-year, indicating increasing pressure on debt management[9] Land Sales and Special Bonds - Land sale revenue continued to show positive growth, increasing by 7% year-on-year, supported by active land market transactions[9] - Special bonds and specific government bonds have significantly bolstered fund expenditures, with fund spending growing by 31.7% year-on-year[9] Government Debt and Future Outlook - The front-loading of government debt has boosted fiscal expenditure, but expectations for economic stability still require fiscal support[9] - Excluding capital injections and debt relief funds, general fiscal expenditure growth would drop from 9.3% to 2.9%[9] - The net financing of government debt is expected to decrease in the second half of the year, impacting local government cash flow and economic indicators[9]

Group 1: Financial Data Overview - In July, the total social financing (社融) stock growth rate rebounded to 9.0% year-on-year, while the credit growth rate under the social financing measure fell to 6.8%[3] - New social financing in July was 1.2 trillion RMB, with a year-on-year increase of 0.4 trillion RMB, primarily supported by government bonds[7] - The new RMB loans in July were negative at -50 billion RMB, marking a historical low since data tracking began[7] Group 2: Economic Outlook and Policy Implications - The growth rate of social financing may peak and decline, with government bonds providing some support, but a year-on-year decrease in government bonds is expected in Q4[3] - Future policies may prioritize the implementation of existing policies, with incremental policies being adjusted based on domestic and international conditions[3] - There remains a window for interest rate cuts and reserve requirement ratio reductions within the year, alongside an emphasis on accelerating the issuance of existing government bonds in Q3[7] Group 3: Credit and Deposit Trends - The credit demand has shown a temporary decline due to the "anti-involution" measures, which have squeezed out inflated loans and led to a reduction in credit demand[7] - M1 and M2 growth rates improved, with M1 rising to 5.6% and M2 to 8.8% year-on-year, driven by increased non-bank deposits[7] - In July, the total new loans for households and enterprises were both negative when excluding bill financing, indicating a weak credit environment[7]

Report Industry Investment Rating No relevant content provided. Core Viewpoints of the Report - In the first half of the year, fiscal expenditure was front - loaded, while fiscal revenue was weak. The general budget fiscal deficit increased year - on - year, and the broad fiscal deficit rate was at a relatively high level. In June, the growth rates of general public budget revenue and expenditure both declined, while those of government - funded revenue and expenditure increased significantly. In the second half of the year, the intensity of fiscal expenditure is expected to decline, and policy - based financial instruments are expected to be introduced in the third quarter, while other incremental fiscal policies may need to wait [1][3][4][5]. Summary by Directory 1. First - half Fiscal Operation - **Revenue and Expenditure Growth**: From January to June, the cumulative year - on - year growth rate of broad fiscal revenue was - 0.6%, remaining negative. The year - on - year growth rate of broad fiscal expenditure was 8.9%, indicating front - loaded expenditure. In June, the year - on - year growth rates of broad fiscal revenue and expenditure were 2.8% and 17.6% respectively, showing marginal improvement [9]. - **Budget Completion**: Compared with the annual budget, the revenue side fell short of expectations. The cumulative year - on - year growth rate of general public budget revenue was - 0.3% (the annual budget was + 0.1%), mainly due to the actual - 1.2% growth of tax revenue (the annual budget was + 3.7%) and the 3.7% growth of non - tax revenue (the annual budget was - 14.2%). The cumulative year - on - year growth rate of government bond fund revenue was - 2.4%, and it was still challenging to achieve the 0.7% annual budget growth. On the expenditure side, the growth rate of fiscal expenditure was 3.4%, slightly lower than the 4.4% annual budget growth. The growth rate of government - funded expenditure was 30%, slightly lower than the 23.1% annual budget growth, and its sustainability needs further observation [1][11]. - **Deficit and Debt**: The general budget fiscal deficit in the first half of the year was 2.57 trillion yuan, a year - on - year increase of about 0.5 trillion yuan. Assuming a 4% nominal GDP growth this year, the cumulative broad fiscal deficit rate from January to June was 3.7%, at a relatively high level compared with previous years, similar to 2022, indicating strong support from debt income for fiscal expenditure. The issuance of general treasury bonds, replacement special bonds, and special treasury bonds was front - loaded, and the issuance of special bonds was neutral with an accelerating trend since the end of June [1][2][15]. 2. June Fiscal Data Review - **Revenue Side**: In June, the year - on - year growth rate of general public budget revenue turned negative (- 0.3%), but the structure improved. Tax revenue increased by 1.0% year - on - year, and non - tax revenue decreased by 3.7% year - on - year. Among taxes, personal income tax, domestic VAT, and securities trading stamp duty had relatively high growth rates. The year - on - year growth rate of government - funded revenue was 20.8%, a significant improvement, but its sustainability may be weak due to the continued weak growth of real estate investment [3][22][27]. - **Expenditure Side**: The expenditure intensity of the general public budget decreased, with a year - on - year growth rate of 0.38%. The year - on - year growth rate of government - funded expenditure increased significantly to 79.2%, mainly due to the improvement of government - funded revenue in June and the impact of the issuance of special treasury bonds since April. Structurally, traditional infrastructure expenditure continued to contract, while expenditure on science and technology and social security had relatively high growth rates [3][30]. 3. Outlook for the Second - half Fiscal Situation - **Expenditure Intensity**: The intensity of fiscal expenditure is expected to decline in the second half of the year. The net financing scale of government bonds is expected to decrease. It is estimated that the net financing of local bonds in the third and fourth quarters will be 1.7 trillion yuan and 537.4 billion yuan respectively, and that of treasury bonds will be 1.6 trillion yuan and 1.7 trillion yuan respectively. The net financing of government bonds in the third and fourth quarters will be 3.3 trillion yuan and 2.2 trillion yuan respectively, with a significant year - on - year decrease, which may drag down the year - on - year growth of fiscal expenditure. In addition, the scale of special bonds for project expenditure is also expected to decline in the second half of the year [4][34]. - **Policy Expectations**: The third quarter may enter a policy observation period. Policy - based financial instruments are expected to be introduced, but the timing is uncertain. Other incremental fiscal policies may need to wait until after the introduction of policy - based financial instruments or when the domestic economy weakens [5][41].

Group 1: Market Overview - During the tax period from July 14-18, liquidity tightened significantly, with overnight rates jumping approximately 10 basis points on the first day of the tax period, reaching 1.57% and 1.53% for R001 and DR001 respectively[1] - The central bank increased reverse repo operations, with daily net injections exceeding 300 billion, leading to a gradual recovery in market sentiment and a return of overnight rates below 1.5%[1] - By July 18, overnight rates settled at 1.49% and 1.46% for R001 and DR001, while 7-day rates approached 1.50%[1] Group 2: Future Outlook - The central bank's supportive stance suggests that liquidity is unlikely to experience significant fluctuations, with overnight rates expected to return to around 1.4% and 7-day rates fluctuating around 1.50%[2] - A total of over 20 trillion yuan in public market maturities is expected next week, including 17,268 billion yuan in reverse repos and 2,000 billion yuan in MLF maturities[2] - The upcoming week will see a significant amount of certificates of deposit maturing, with a total of 10,699 billion yuan, but the impact on liquidity is expected to be limited due to manageable bank liabilities[2] Group 3: Public Market and Government Bonds - From July 14-18, the central bank's net injection in the public market was 12,011 billion yuan, with reverse repos contributing 13,011 billion yuan[3] - Government bond net payments are projected to decrease to 2,399 billion yuan for the week of July 21-25, with a notable increase in local government bond payments[5] - The issuance of government bonds is set to rise significantly, with planned issuance of 7,508 billion yuan, including 3,750 billion yuan in national bonds and 3,758 billion yuan in local bonds[5] Group 4: Interbank Certificates of Deposit - The weighted issuance rate for interbank certificates of deposit rose to 1.62%, reflecting a 1 basis point increase from the previous week[6] - The pressure from maturing certificates of deposit is expected to rise, with 10,699 billion yuan maturing in the week of July 21-25, marking a relative high for the year[6] - The overall market for certificates of deposit is showing signs of tightening, with a decrease in the proportion of longer-term issuances[6]

Group 1: Monetary Indicators - In June, the new social financing scale reached 4.2 trillion yuan, an increase of 900 billion yuan year-on-year[1] - The year-on-year growth of M1 rose to 4.6% in June from 2.3% in May, while M2 increased to 8.3% from 7.9%[2] - The M2-M1 spread narrowed to 3.7%, down 1.9 percentage points from the previous month[2] Group 2: Government Financing and Debt - Government bonds accounted for 32.3% of social financing in June, down from 63.8% in the previous month[3] - Net financing of government bonds in June was 1.3548 trillion yuan, an increase of 507.2 billion yuan year-on-year[3] - By June, the total government bond issuance for the year reached 7.66 trillion yuan, representing 65% of the annual issuance plan[3] Group 3: Corporate and Household Loans - Corporate loans in June saw a seasonal increase of 1.77 trillion yuan, up 140 billion yuan year-on-year, with short-term loans rising by 1.16 trillion yuan[3] - Household loans increased by 3.353 trillion yuan for medium to long-term and 2.621 trillion yuan for short-term loans, reflecting a slight recovery in consumer confidence[3] - Overall, the performance of household credit remains moderate, indicating cautious economic expectations[3]

1. Report Industry Investment Rating No relevant content provided. 2. Core Viewpoints of the Report - The capital market is expected to enter a relatively comfortable range in July, supported by seasonal patterns and the central bank's supportive attitude. However, there are still some disturbances in July, and attention should be paid to the periodic pressure on the capital market [2][17][20] - Next week, the pressure of maturing certificates of deposit and the net payment scale of government bonds will increase, but the capital market at the beginning of the month is expected to remain balanced and loose. With the central bank's support, the capital price may continue to run at a relatively low level [3][27] 3. Summary by Relevant Catalogs 3.1 1. 1.3% Overnight Rate Sustainability - The central bank's large - scale injection supported the cross - quarter capital market, with seasonal increases in capital prices and overall stability. After the cross - quarter period, the central bank's large - scale net withdrawal did not change the loosening trend of the capital market, and the lending of large banks rebounded rapidly, leading to a decline in capital and certificate of deposit prices [1][12] - In July, the capital market may enter a comfortable range, but there are disturbances such as tax payments and MLF withdrawals in the middle of the month, and attention should be paid to the central bank's injection [2][20][25] 3.2 2. Open Market: Next Week's Maturity Pressure Declines - From June 30 to July 4, the net reverse repurchase investment in the open market was - 13753 billion yuan. From July 7 to July 11, 6522 billion yuan of reverse repurchases will mature [4][32][33] 3.3 3. Government Bonds: Local Bond Issuance Exceeds 2000 Billion Yuan Next Week - This week, the net payment of government bonds was 341 billion yuan. Next week, government bond issuance will drop to 2020 billion yuan, with no treasury bond issuance and 2020 billion yuan of local bond issuance. The net payment of treasury bonds is 1599 billion yuan, and that of local bonds is 1112 billion yuan [38] 3.4 4. Excess Reserve Tracking Forecast - It is predicted that the excess reserve ratio in July 2025 will be about 0.85%, a month - on - month decrease of about 0.3 pct and a year - on - year decrease of 0.64 pct [43] 3.5 5. Money Market: This Week's Capital Interest Rates Declined - Compared with June 27, DR001, DR007, R001, and R007 decreased by 5.43BP, 27.46BP, 9.94BP, and 43.2BP respectively to 1.31%, 1.42%, 1.36%, and 1.49% [6][46] - The overnight and 7 - day SHIBOR rates decreased by 1.34BP and 9.32BP respectively to 1.37% and 1.63%. The overnight and 7 - day CNH HIBOR rates decreased by 5.91BP and 9.56BP respectively to 1.76% and 1.81% [51] 3.6 6. Interbank Certificates of Deposit 6.1 Primary Market: This Week's Certificate of Deposit Issuance Scale Continued to Decline - From June 30 to July 4, the total issuance of inter - bank certificates of deposit was 2429 billion yuan, with a net financing of - 339 billion yuan. Compared with last week, the issuance scale decreased, and the net financing increased [69] - By issuer, joint - stock banks had the highest issuance scale, and city commercial banks had the highest net financing. By term, 1 - year certificates of deposit had the highest issuance scale and net financing [69] - Next week, the maturity scale of inter - bank certificates of deposit will be 5213 billion yuan, an increase from this week [70][80] 6.2 Secondary Market: Yields Broke Through the Previous Low - This week, the secondary yields of certificates of deposit continued to decline, breaking through the previous low and mostly operating in the range of 1.5% - 1.6% [95] - The yields of certificates of deposit of all terms and grades decreased. The relative value of certificates of deposit changed compared with last week [95][101]

Investment Rating - The industry investment rating is "Outperform" [1][25]. Core Insights - The report highlights that government bonds are supporting the increase in social financing, with a notable year-on-year increase in social financing of 22.47 billion yuan in May [2][3]. - The report suggests focusing on the investment value of bank stocks, particularly recommending China Merchants Bank, Agricultural Bank of China, and Jiangsu Bank [2]. Summary by Sections Financial Data Overview - In May, the total new RMB loans amounted to 620 billion yuan, a year-on-year decrease of 330 billion yuan. The increase in short-term loans for enterprises improved, while medium to long-term loans still require improvement [2][4]. - The social financing increment for May was 2.29 trillion yuan, which is a year-on-year increase of 224.7 billion yuan, primarily driven by government bonds [2][3]. Government Bonds and Corporate Financing - The net financing of government bonds in May reached 1.46 trillion yuan, a year-on-year increase of 231.9 billion yuan. Direct financing for enterprises increased by 164.8 billion yuan, a year-on-year increase of 125.2 billion yuan [3]. - The report indicates that the demand for medium to long-term credit from enterprises remains insufficient, with a total of 5.3 trillion yuan in new loans for enterprises in May, a year-on-year decrease of 210 billion yuan [4]. Monetary Supply Trends - The M2 growth rate was 7.9%, while M1 growth rate was 2.3%, showing a slight decrease in M2 and an increase in M1 compared to the previous month [5]. - In May, the total RMB deposits increased by 2.18 trillion yuan, a year-on-year increase of 500 billion yuan, with a notable increase in fiscal deposits [5].

Core Viewpoint - The article highlights the improvement in financial conditions in May, with social financing increasing by 2.3 trillion yuan, slightly exceeding market expectations, while credit growth remains weak due to demand-side factors [1][7][13]. Summary by Sections Social Financing - In May, social financing increased by 2.3 trillion yuan, a year-on-year increase of 227.1 billion yuan, slightly above the market average expectation of 2.05 trillion yuan [1][7]. - The total social financing scale for the first five months of 2025 reached 18.63 trillion yuan, an increase of 3.83 trillion yuan compared to the same period last year [7]. Credit Analysis - The increase in real credit was 596 billion yuan, a year-on-year decrease of 223.7 billion yuan, indicating a weaker demand side [8]. - The BCI index showed an improvement in the financing environment for enterprises, suggesting that supply conditions may not be weak [8][9]. Corporate Loans - Long-term loans for enterprises increased by 330 billion yuan, a year-on-year decrease of 170 billion yuan, reflecting weak investment in infrastructure and manufacturing [9]. - Short-term loans increased by 230 billion yuan year-on-year, while bill financing decreased by 282.6 billion yuan, indicating a preference for short-term loans due to higher yields [9]. Bond Financing - Corporate bonds increased by 149.6 billion yuan, a year-on-year increase of 121.1 billion yuan, likely due to lower deposit rates and increased credit bond financing [10][11]. - Government bonds increased by 1.46 trillion yuan, a year-on-year increase of 236.7 billion yuan, reflecting accelerated fiscal implementation [10][11]. Foreign Currency Loans - Foreign currency loans increased by 13.5 billion yuan, marking the first positive growth since March 2024, attributed to a weaker dollar and improved exchange rate expectations [11]. M1 Growth - M1 growth was 2.3%, an increase of 0.8 percentage points from the previous month, indicating a slight recovery in economic conditions [12]. - However, M1 performance remains weak, with a decrease of 230.7 billion yuan in May compared to previous years, influenced by debt replacement and shifts in deposit preferences [12]. Overall Financial Conditions - The article concludes that while supply-side conditions have improved, demand-side expectations remain uncertain, with ongoing impacts from debt replacement affecting financial data [13].

Core Viewpoints - The core viewpoint indicates that with the strengthening of internal policies and the alleviation of external shocks, the expectations of micro entities may stabilize in the future [3][8][46] - The sudden increase in M2 year-on-year growth in April is primarily due to the rapid replenishment of non-bank deposits, which may be related to effective macro policies responding to tariff shocks, leading to accelerated capital market replenishment [3][46] - The April deposit data shows that non-bank deposits increased by 1.6 trillion, a year-on-year increase of 1.9 trillion, which is the main source of M2's year-on-year recovery [3][46] Financial Data Summary - In April, the credit balance decreased by 0.2 percentage points year-on-year to 7.2%, while the social financing stock increased by 0.3 percentage points to 8.7%, and M2 increased by 1.0 percentage points to 8.0% [2][7][45] - The structure of social financing in April showed characteristics of "government bonds leading, corporate bonds improving," with government bonds increasing by 10.666 billion year-on-year, marking the third consecutive month of over 10 billion increase [20][32][49] - The April social financing increased by 11.591 billion, a year-on-year increase of 12.249 billion, with corporate bond financing recovering [32][49] Credit Performance - In April, corporate credit exhibited a pattern of "loan decline and bond financing recovery," with short-term loans declining possibly due to previous "rush" and medium to long-term loans showing less increase due to debt resolution progress and tariff shock impacting corporate expectations [12][20][46] - The April resident credit performance was described as "tepid," with employment market pressures and tariff disturbances leading to a cautious debt attitude among residents [15][47] - The BCI enterprise recruitment index remained below 50 for two consecutive months (March-April), reflecting the pressure on the employment market [15][47] Future Outlook - The combination of policy measures and the alleviation of external shocks is expected to resonate, potentially stabilizing micro entity expectations [25][48] - On May 7, the central bank announced ten specific measures including a 50 basis point reserve requirement ratio cut and a 10 basis point interest rate cut, reinforcing support for the capital market, real estate market, and private economy [25][48] - The phase-wise easing of China-US trade tensions is anticipated to further improve micro entity expectations and stabilize the release of corporate credit demand [25][48]

Core Viewpoints - The sudden increase in M2 growth in April is primarily due to a rapid recovery of non-bank deposits, which is linked to effective macro policies responding to tariff shocks, leading to accelerated capital market recovery [3][8][46] - The credit landscape in April shows a pattern of "loan decline and bond financing recovery," with short-term loans decreasing due to previous surges, while medium to long-term loans saw a smaller increase, influenced by debt resolution progress and tariff shock impacting corporate expectations [12][20][46] Financial Data Summary - In April, the total new credit was 280 billion, a year-on-year decrease of 450 billion, mainly due to the corporate sector [26][49] - The total social financing (社融) increased by 1,159.1 billion, a year-on-year increase of 1,224.9 billion, with corporate bond financing showing signs of recovery [32][49] - M2 increased by 1.0 percentage points year-on-year to 8.0%, while M1 decreased by 0.1 percentage points to 1.5% [39][50] Resident and Corporate Credit Trends - Resident credit remained subdued, with a cautious debt attitude due to employment market pressures and tariff disturbances, reflected in the BCI enterprise hiring index remaining below 50 for two consecutive months [15][47] - The structure of social financing in April showed a dominance of government bonds and improvement in corporate bonds, with government bonds increasing by 10,666 billion year-on-year [20][48] Future Outlook - The combination of policy measures and easing external shocks is expected to stabilize microeconomic expectations, with the central bank announcing ten specific measures to support capital markets, real estate, and the private economy [25][48] - The recent easing of US-China trade tensions is anticipated to further improve microeconomic expectations and stabilize corporate credit demand [25][48]