Group 1: Report Information - Report Title: "Exchange Rate and Liquidity Framework Series 1: What Impact Will Subsequent Foreign Exchange Settlement and Sale Have on Liquidity?" [1] - Report Date: March 4, 2026 [2] - Analysts: Xu Liang (S0590525110037), Research Assistant: Huang Ziyi (S0590125110076) [4] Group 2: Investment Rating - The report does not mention the industry investment rating. Group 3: Core Viewpoints - The impact of foreign exchange settlement and sale on liquidity is mainly reflected in the four - core links of "customs trade surplus → bank's foreign - related payments on behalf of customers → bank's foreign exchange settlement and sale on behalf of customers → central bank's foreign exchange position". The differences between each link determine the intensity and rhythm of liquidity release [6][9]. - Since 2022, China's goods trade has shown the characteristics of "substantial surplus in foreign - related payments and weak willingness of enterprises to settle foreign exchange". As of January 2026, about 1.14 trillion US dollars of un - settled foreign exchange funds have been accumulated. The overall scale of China's foreign exchange funds to be settled is less than 20 billion US dollars, and the difference is mainly due to the continuous cross - border outflow of the securities investment project in the capital and financial account [6][22]. - The "positive return combination of interest rate spread repair + exchange rate appreciation" will drive foreign capital to re - allocate domestic assets and promote the return of carry - trade funds, which will push the full - caliber scale of foreign exchange funds to be settled into an upward channel [29]. - The central bank has a variety of tools in its exchange rate management toolbox. When the RMB appreciation expectation is too strong, it can take corresponding measures to weaken the appreciation; when the RMB depreciation expectation is too strong, it can take measures to weaken the depreciation [6][30][36]. Group 4: Summary by Directory 1 How to Analyze the Impact of Foreign Exchange Settlement and Sale on Liquidity 1.1 The Transmission Chain from Customs Trade Surplus to Foreign Exchange Position - The transmission from cross - border trade surplus to bank system liquidity is mainly reflected in four core links: "customs trade surplus → bank's foreign - related payments on behalf of customers → bank's foreign exchange settlement and sale on behalf of customers → central bank's foreign exchange position". The differences between customs trade surplus and bank's foreign - related payments on behalf of customers are mainly due to cross - border payment time differences and pricing differences. The difference between bank's foreign - related payments on behalf of customers and foreign exchange settlement and sale surplus depends on enterprises' willingness to settle foreign exchange. Whether the bank's foreign exchange settlement and sale surplus on behalf of customers can be converted into the central bank's foreign exchange position depends on the bank's willingness to square positions [6][9][12]. 1.2 Specific Changes in Accounting Subjects - When an enterprise receives 1 million US dollars of foreign exchange and deposits it in Bank A, Bank A's assets and liabilities increase simultaneously. When the enterprise settles foreign exchange with Bank A, Bank A's asset side remains unchanged, and the liability side structure changes. If Bank A squares positions with another commercial bank, the total amount of reserves in the banking system remains unchanged; if it squares positions with the central bank, the central bank's foreign exchange position increases, and the total amount of reserves in the banking system increases [14][15][16]. 2 How to View the Scale of Foreign Exchange Settlement Funds and the Foreign Exchange Positions Not Squared with the Central Bank - The current RMB appreciation is driven by multiple internal and external factors. Since 2022, China's goods trade has had a large surplus in foreign - related payments, but enterprises' willingness to settle foreign exchange is weak. The overall scale of foreign exchange funds to be settled is less than 20 billion US dollars, and the difference from the goods trade scale is due to the continuous cross - border outflow of the securities investment project. In the future, the scale of full - caliber foreign exchange funds to be settled will tend to approach the scale of goods trade foreign exchange funds to be settled [20][22][29]. 3 What Tools Are in the Central Bank's Exchange Rate Management Toolbox - On February 27, 2026, the central bank announced that it would lower the foreign exchange risk reserve ratio for forward foreign exchange sales from 20% to 0. The central bank's exchange rate management toolbox also includes offshore central bank bills, foreign exchange deposit reserve ratio, cross - border financing macro - prudential adjustment parameters, and counter - cyclical factors. When the RMB appreciation or depreciation expectation is too strong, the central bank can use these tools to adjust [30][36].

Group 1 - The article discusses the necessity for companies to utilize their foreign exchange quotas to convert RMB into USD for purchasing US stock funds, highlighting potential limitations due to fund company quotas [3] - Interest rate risk is defined as the impact of fluctuations in financial market interest rates on asset returns, with a notable quote from Buffett comparing interest rates to gravity. Rising interest rates typically indicate a bear market for bonds, while falling rates suggest a bull market [4] - Currency risk is addressed, emphasizing the unpredictability of exchange rate movements and their potential impact on investment returns, particularly when converting RMB to foreign currencies [6] Group 2 - Policy risk is described as a more extreme form of risk, where foreign governments may impose restrictions on capital inflows, exemplified by the limitations faced by overseas investors during the Asian financial crisis in the 1990s [7]

Group 1 - The core viewpoint of the articles discusses the trading mechanisms, net asset value calculation, and investment strategies related to cross-border ETFs [1][2][3] Group 2 - Cross-border ETFs allow for T+0 trading, enabling investors to buy and sell on the same day, with a low minimum investment unit of 1 lot (100 shares) [1] - The net asset value of cross-border ETFs is influenced by the performance of the tracked index and currency fluctuations, with a delay in reporting due to different market closing times [1] - Investment strategies for cross-border ETFs include asset allocation, systematic investment plans, staggered buying and selling, and valuation methods based on PE and PB ratios [2] Group 3 - Major risks associated with investing in cross-border ETFs include currency risk, market risk, differences in trading dates between domestic and foreign markets, and tracking errors due to various factors [2][3]

Core Viewpoint - The continuous appreciation of the RMB against the USD is putting pressure on export companies, particularly in low-value-added industries like steel, where pricing sensitivity is high [1][2][6]. Exchange Rate Trends - As of February 27, 2026, the offshore RMB/USD exchange rate reached 6.8528, while the onshore rate was 6.8559, marking a significant appreciation since early 2025 [1]. - The RMB has appreciated over 1400 basis points since early 2025, with the onshore rate fluctuating but generally trending upwards [2][3]. Impact on Export Companies - Exporters are facing challenges in pricing due to the rapid appreciation of the RMB, which affects profit margins on existing orders [1][2]. - Companies are adjusting their pricing strategies to mitigate potential losses from exchange rate fluctuations, with some opting to quote lower rates to remain competitive [2][3]. Central Bank Actions - The People's Bank of China announced a reduction in the foreign exchange risk reserve ratio for forward sales from 20% to 0%, effective March 2, 2026, aimed at supporting companies in managing exchange rate risks [1][5]. - This policy change is expected to lower costs for financial institutions and encourage more companies to utilize hedging tools to manage currency risk [5]. Export Performance - Despite the RMB appreciation, China's export performance remains strong, with a total trade value of 45.47 trillion yuan in 2025, reflecting a 3.8% year-on-year increase [6]. - The correlation between RMB appreciation and export performance is low, indicating that the Chinese economy is becoming less sensitive to exchange rate fluctuations [7]. Future Outlook - Analysts suggest that the RMB is currently in a balanced range, with various factors influencing its future movements, including potential U.S. monetary policy changes and the overall economic environment [8]. - Seasonal trends may lead to fluctuations in the RMB exchange rate, with expectations of a slight appreciation over the year despite potential short-term volatility [8].

Group 1 - The first step to invest in US stocks is to open an account with a legally qualified intermediary, which can be a domestic broker with relevant business licenses or a compliant foreign broker [1] - Investors must complete identity verification and risk tolerance assessments during the account opening process, and intermediaries will review the appropriateness of investors according to regulatory requirements [1] - Legal regulations and compliance are fundamental for investing in US stocks, requiring adherence to current rules from the SEC and FINRA, as well as updates from the 2025 revised legislation regarding cross-border investment information reporting and investor protection [1] Group 2 - Familiarity with US stock trading rules is crucial to avoid operational risks, including the T+0 trading system and restrictions on day trading for accounts with net assets below $25,000 [1] - The trading hours differ between summer and winter time, and there are various levels of circuit breakers that trigger trading halts during significant market fluctuations [1] - Tax costs and exchange rate risks must be considered, as non-US residents are subject to withholding tax on dividends, and fluctuations in the RMB-USD exchange rate can directly impact actual returns [2] Group 3 - Information acquisition and risk awareness are equally important, as the information disclosure standards in the US market differ from those in the domestic market [2] - Investors should obtain company announcements and financial reports through legitimate channels to ensure accuracy and timeliness [2] - The US market also presents risks such as market volatility and industry cycles, necessitating that investors make decisions based on their risk tolerance [2]

Core Viewpoint - The company is monitoring the impact of the appreciation of the RMB on its dollar-denominated revenue, given that approximately 44.95% of its business is derived from exports [1] Group 1 - The company's export business accounts for about 44.95% of its total revenue [1] - The company is committed to continuously tracking exchange rate trends [1] - The company aims to strengthen its foreign exchange risk management strategies [1]

Monetary Policy Measures - The central bank has introduced new monetary policy measures, including a 0.25 percentage point reduction in various structural monetary policy tool rates, expected to save banks approximately 13.5 billion yuan annually[5] - The re-lending and rediscounting for agricultural and small enterprises have been merged, increasing the quota by 500 billion yuan, with a dedicated 1 trillion yuan for private enterprises[7] - The minimum down payment ratio for commercial property loans has been lowered to 30% to support the real estate market[8] Exchange Rate Management - The central bank aims to stabilize the foreign exchange market in 2026, with a projected net inflow of 302.1 billion USD for the year, indicating a shift from net outflow[9] - Approximately 60% of import and export trade is minimally affected by exchange rate fluctuations, with 30% of foreign trade conducted in RMB[10] - The central bank emphasizes the importance of balanced import and export development and plans to enhance macro-prudential management to mitigate exchange rate risks[11] Financial Data Trends - As of December 2025, the total social financing stock grew by 8.3% year-on-year, while loan stock increased by 6.4%[15] - The growth rate of M2 rose to 8.5%, reflecting a 0.5 percentage point increase from the previous month[15] - Direct financing reached 16.7 trillion yuan in December 2025, accounting for 46.9% of total social financing, an increase of 7.8 percentage points compared to 2020[16]

Core Viewpoint - The company has not yet adopted digital RMB for cross-border settlements, and the appreciation of the RMB may impact its business due to a high proportion of overseas revenue [1] Group 1: Currency Risk Management - The company faces currency risk due to its significant overseas revenue, and it is implementing strategies to mitigate this risk [1] - To address exchange rate risks, the company utilizes global supply chain strategies and local operations of its subsidiaries [1] - The company employs forward foreign exchange contracts to lock in future exchange rates and is exploring cross-border RMB settlement options [1] - Current exchange rate fluctuation risks are considered manageable by the company [1]

Group 1 - Several leading listed companies have announced substantial hedging plans for the 2026 fiscal year, with notable commitments from 佛燃能源, 新奥股份, 隆基股份, and 三一重工 [1] - 佛燃能源 has set a maximum contract value limit of 12 billion RMB for its commodity and foreign exchange hedging business for 2026, with a margin cap of 4.17 billion RMB [1] - 新奥股份 plans to utilize a maximum margin and premium of 4.7 billion USD for its 2026 commodity hedging plan [1] - 隆基股份 has a maximum margin limit of 1.5 billion RMB for its hedging business in 2026 [1] - 三一重工's subsidiary plans to have a maximum trading margin and premium of 800 million RMB, with a maximum contract value of 2 billion RMB on any trading day [1] Group 2 - A total of 1,782 A-share listed companies in the real economy issued hedging-related announcements from January to November 2025, an increase of 279 companies or 18.6% compared to the entire year of 2024 [3] - Currency risk remains the primary hedging demand, with 1,311 companies issuing related announcements, followed by interest rate risk (517 companies) and commodity price risk (481 companies) [3] - The electronics, basic chemicals, power equipment, machinery, and pharmaceutical industries have the highest number of companies engaging in hedging [3] - Copper is identified as the most actively hedged commodity [3] - Over 30 domestic insurance institutions have entered the futures market, primarily using government bond futures and stock index futures to manage interest rate risk and equity market volatility [3] - The number of new accounts opened by insurance funds in the futures market increased by 166% year-on-year in the first 11 months of 2025, reaching a historical high [3] - Recent regulatory documents have supported the participation of insurance funds in financial derivatives trading, providing a framework for managing asset-liability risks [3]

Core Viewpoint - The recent strengthening of the RMB against the USD has prompted many A-share companies to adopt foreign exchange hedging strategies to manage risks associated with currency fluctuations [1] Group 1: Currency Exchange Rate Trends - As of December 10, the onshore RMB/USD exchange rate reached a high of 7.0603, marking the highest level since October 2024 [1] - The RMB is approaching the significant threshold of 7.0, which has raised concerns about exchange rate risks [1] Group 2: Corporate Responses - Numerous A-share companies involved in overseas business have significantly increased their foreign exchange hedging limits [1] - China Shipbuilding (600150) announced on December 9 that it plans to engage in futures and derivatives trading with a maximum trading limit of $24 billion and a maximum contract value of $51 billion on any trading day [1] - Over 30 A-share companies have disclosed plans to implement foreign exchange hedging strategies in December to mitigate risks from currency market volatility [1] Group 3: Industry Analysis - Industry experts indicate that many foreign trade enterprises are concerned that fluctuations in exchange rates may reduce the amount of foreign currency received from exports, thereby impacting profitability [1] - The primary objective for listed companies participating in hedging is to hedge against exchange rate risks [1]