Core Viewpoint - The digital renminbi is transitioning from a digital cash era to a digital deposit currency era, with a new management and service framework set to be implemented on January 1, 2026 [1][2] Group 1: Digital Renminbi Development - The new action plan clarifies that the digital renminbi will have the characteristics of commercial bank liabilities, moving from central bank liabilities, which addresses key issues such as financial disintermediation risk and liquidity management [2] - The digital renminbi will be a modern digital payment and circulation method, compatible with distributed ledger technology, and will serve functions such as a measure of value, store of value, and cross-border payment [1] Group 2: Market Impact - The transition to a digital deposit currency will enhance user convenience, offering features like offline payments, real-time settlement, and improved security and yield for deposits, significantly increasing the attractiveness of the digital renminbi [2] - Banks will gain asset-liability management rights over digital renminbi, allowing them to activate wallet funds through wealth management and credit services, thus increasing participation [2] Group 3: Regulatory Framework - The action plan optimizes the "dual-layer architecture," where the central bank sets business rules and technical standards, while commercial banks manage digital renminbi wallets and ensure compliance and anti-money laundering responsibilities [3] - A digital renminbi management committee will be established by the People's Bank of China to coordinate relevant business lines and regulatory functions [3] Group 4: Market Reaction - Following the announcement, the digital currency sector and related stocks saw significant gains, with companies like Lakala rising by 12.57% and ST Tianyu by 11.40% on December 29 [3]

Core Viewpoint - The People's Bank of China has announced that starting next year, digital yuan wallet balances will earn interest, marking a significant shift in its underlying logic and positioning [1][2]. Group 1: Changes in Digital Yuan Management - The new action plan states that digital yuan wallet balances will be included in the reserve requirement framework, and non-bank payment institutions will be required to maintain a 100% reserve for digital yuan [1][7]. - Digital yuan is expected to be treated similarly to current demand deposits in commercial banks, which typically have an interest rate of 0.05% [2][3]. Group 2: Implications for Financial Institutions - The transition of digital yuan from "cash in hand" to "bank liabilities" will provide banks with a low-cost source of funding, optimizing their liability structure [2][4]. - This change is anticipated to enhance the motivation of banks to promote and utilize digital yuan, as it can now be integrated into their asset-liability management [6][7]. Group 3: Potential Applications and Growth - The digital yuan's new status is expected to lead to an explosion in its applications, particularly in areas like supply chain finance and cross-border payments, leveraging its smart contract capabilities [7][8]. - The digital yuan is projected to evolve into a comprehensive financial tool, integrating deeper into the economic cycle from personal savings to corporate credit [8]. Group 4: Market Impact and Future Outlook - The shift to bank liabilities is seen as a solution to the "financial disintermediation" challenge, ensuring that currency creation and circulation remain within the financial system [4][5]. - The digital yuan's development is expected to follow a "dual circulation" path, enhancing its role in both domestic and international financial systems [8].

Investment Rating - The report maintains a "Recommended" investment rating for the banking sector, indicating a positive outlook for the industry in the near term [1]. Core Insights - The positioning of the digital RMB is expected to advance, with significant potential in the payment sector. The People's Bank of China (PBOC) is working on optimizing the management system for digital RMB, which may evolve from a cash-like payment instrument (M0) to broader monetary categories (M1, M2) [2][8]. - Infrastructure development for digital RMB is progressing, with the establishment of international and operational centers in Shanghai and Beijing, respectively. As of September 2025, the cumulative transaction amount in pilot areas reached 14.2 trillion yuan, with 2.25 billion personal wallets opened [3][8]. - The banking sector is expected to see a systematic recovery in valuations in 2026, transitioning from a defensive to a growth-oriented investment logic. Key investment themes include high dividend yields and low valuations, particularly as risk-free interest rates decline [9]. Summary by Sections Industry Overview - The banking sector comprises 42 listed companies with a total market capitalization of approximately 1.15 trillion yuan, representing 13.04% of the market [4]. - The average daily trading volume for A-shares was 10,583.60 billion yuan, reflecting a 0.65% increase from the previous week [8]. Performance Metrics - The absolute performance of the banking sector over the past month is 5.0%, with a relative performance of 2.8% compared to the benchmark [5]. - The report highlights that the banking index underperformed the CSI 300 index by 2.46 percentage points during the week [8]. Investment Recommendations - The report suggests focusing on three main investment lines: 1. State-owned banks and major commercial banks like China Merchants Bank. 2. Quality joint-stock banks and city commercial banks with improving net interest margins and credit costs. 3. City commercial banks benefiting from regional policies and showing significant performance potential [9]. - Specific banks recommended for investment include China Merchants Bank, CITIC Bank, and several city commercial banks such as Chengdu Bank and Chongqing Bank [9][10].