1. Report Industry Investment Rating No industry investment rating is provided in the report. 2. Report Core View The current economy may still be under pressure, with the core contradiction of economic operation focusing on "the co - existence of the drag from the adjustment of old growth drivers and the growth of new ones." The short - term pressure on consumption and investment corresponds to the low - growth trend of fiscal revenue and expenditure. The demand side may remain under pressure, and if consumption and investment continue to be weak, it may affect the Q4 economic growth rate, which is expected to slow down compared to Q3. The real estate market is still at the bottoming stage, and residents may maintain a cautious attitude towards consumption in the short term. The fiscal operation shows the characteristics of "low revenue growth and differentiated central and local expenditures." The economic and fiscal situation aligns with the policy deployment of the 2025 Central Economic Work Conference. The economy may show a weak recovery next year, and the pressure on fiscal revenue and expenditure balance may continue [2][85]. 3. Summary by Related Catalogs 3.1 Macro News - **Fiscal Revenue and Expenditure**: In the first 11 months of 2025, the national general public budget revenue was about 20.1 trillion yuan, with a year - on - year increase of 0.8%. In November, it was about 1.4 trillion yuan, a year - on - year decrease of 0.02%. The general public budget expenditure in November was 2.3 trillion yuan, a year - on - year decrease of 3.71%, with the decline narrowing by 6.07 pct compared to the previous month. Tax revenue in the first 11 months was about 16.5 trillion yuan, a year - on - year increase of 1.8%. In November, tax revenue increased by 2.8% year - on - year, while non - tax revenue decreased by 10.8% year - on - year, with the decline narrowing by 22.13 pct compared to the previous month. In terms of expenditure, central expenditure increased by 4.9% year - on - year in November, while local expenditure decreased by 5.1% [10][12][16]. - **Consumption, Investment, and Foreign Trade**: In November, the total retail sales of consumer goods were 4.4 trillion yuan, a year - on - year increase of 1.3%, with the growth rate dropping by 1.6 pct compared to the previous month. From January to November, fixed - asset investment decreased by 2.6% year - on - year. Infrastructure investment, manufacturing investment, and real estate development investment from January to November decreased by 1.1%, increased by 1.9%, and decreased by 15.9% respectively year - on - year. In November, the total import and export value was 3.9 trillion yuan, a year - on - year increase of 4.1%. Exports were 2.3 trillion yuan, a year - on - year increase of 5.7%, and imports were 1.6 trillion yuan, a year - on - year increase of 1.7% [22]. - **US Economic Data**: In November, the number of new non - farm jobs in the US increased by 64,000, higher than the Dow Jones expectation of 45,000. The CPI in November increased by 2.7% year - on - year, lower than the market expectation of 3.1%. The core CPI increased by 2.6% year - on - year, the lowest level since early 2021 and also lower than the market expectation of 3% [26]. 3.2 Meso - level High - frequency Data - **Consumption**: As of December 14, the average daily retail volume of passenger car manufacturers was 67,000 vehicles, a year - on - year decrease of 16.8%, and the average daily wholesale volume was 62,000 vehicles, a year - on - year decrease of 22.4%. As of December 5, the total retail volume of three major household appliances was 784,000 units, a year - on - year decrease of 24.7%, and the total retail sales were 1.63 billion yuan, a year - on - year decrease of 46.1%. As of December 19, the total box - office revenue of national movies in the past 7 days was 68,810,800 yuan, a year - on - year increase of 95.4% [28][31]. - **Transportation**: As of December 14, the port container throughput was 6.589 million twenty - foot equivalent units, a year - on - year increase of 7.4%. As of December 19, the average subway passenger volume in first - tier cities in the past 7 days was 3.9086 million person - times, a year - on - year increase of 2.1%. As of December 14, the postal express delivery volume was 4.13 billion pieces, a year - on - year decrease of 0.3%, and the delivery volume was 4.02 billion pieces, a year - on - year decrease of 1.3%. The railway freight volume was 79.935 million tons, a year - on - year decrease of 2.1%, and the highway truck traffic volume was 54.345 million vehicles, a year - on - year decrease of 2.1% [38][41]. - **Industrial Production**: As of December 17, the blast furnace operating rate of major steel enterprises was 76.1%, a year - on - year increase of 0.9 pct. As of December 18, the average operating rate of asphalt was 21.0%, a year - on - year decrease of 1.0 pct. As of December 18, the operating rate of soda ash was 82.9%, a year - on - year increase of 1.0 pct, and the PVC operating rate was 77.3%, a year - on - year decrease of 1.0 pct. As of December 19, the average operating rate of PX was 88.5%, and the average operating rate of PTA was 74.1% [46][50]. - **Real Estate**: As of December 19, the total commercial housing transaction area in 30 large - and medium - sized cities in the past 7 days was 251,400 square meters, a year - on - year decrease of 25.2%. As of December 12, the second - hand housing transaction area in 9 sample cities was 148,500 square meters, a year - on - year decrease of 39.0% [53][58]. - **Prices**: As of December 19, the average wholesale price of pork was 17.5 yuan/kg, a year - on - year decrease of 24.1% and a 2.6% decrease compared to 4 weeks ago. The average wholesale price of vegetables was 5.9 yuan/kg, a year - on - year increase of 17.6% and a 3.9% increase compared to 4 weeks ago. The average wholesale price of 6 key fruits was 7.6 yuan/kg, a year - on - year increase of 6.1% and a 6.6% increase compared to 4 weeks ago. The average price of thermal coal at northern ports was 744 yuan/ton, a year - on - year decrease of 5.1% and a 10.9% decrease compared to 4 weeks ago. The average spot price of WTI crude oil was 56.2 US dollars/barrel, a year - on - year decrease of 19.9% and a 6.0% decrease compared to 4 weeks ago. The average spot price of rebar was 3,208.9 yuan/ton, a year - on - year decrease of 4.3% and a 1.6% increase compared to 4 weeks ago. The average spot price of iron ore was 803.2 yuan/ton, a year - on - year increase of 0.1% and a 0.5% decrease compared to 4 weeks ago. The average spot price of glass was 13.4 yuan/square meter, a year - on - year decrease of 18.0% and a 2.1% decrease compared to 4 weeks ago [61][63]. 3.3 Bond and Foreign Exchange Markets - **Money Market Rates**: On December 19, the overnight Shibor was 1.27%, a decrease of 0.07 BP compared to December 15. R001 was 1.35%, an increase of 0.51 BP compared to December 15; R007 was 1.51%, an increase of 0.25 BP compared to December 15. DR001 was 1.27%, a decrease of 0.34 BP compared to December 15; DR007 was 1.44%, a decrease of 0.27 BP compared to December 15. IBO001 was 1.33%, an increase of 0.41 BP compared to December 15; IBO007 was 1.46%, a decrease of 1.50 BP compared to December 15 [68]. - **Bond Yields**: On December 19, the yields of 1 - year, 5 - year, 10 - year, and 30 - year treasury bonds were 1.36%, 1.60%, 1.83%, and 2.23% respectively, a decrease of 3.1 BP, 2.5 BP, 0.8 BP, and 2.2 BP respectively compared to December 12. The yields of 1 - year, 5 - year, 10 - year, and 30 - year China Development Bank bonds were 1.58%, 1.80%, 1.97%, and 2.40% respectively, a decrease of 3.0 BP, 3.1 BP, 1.8 BP, and 0.4 BP respectively compared to December 12. The yields of 1 - year, 5 - year, and 10 - year local government bonds were 1.54%, 1.78%, and 2.05% respectively, a decrease of 0.4 BP, an increase of 0.1 BP, and a decrease of 0.5 BP respectively compared to December 12. The yields of 1 - month and 1 - year AAA and AA + inter - bank certificates of deposit were 1.62%, 1.64%, 1.64%, and 1.67% respectively, a decrease of 0.2 BP, 2.6 BP, 0.2 BP, and 2.6 BP respectively compared to December 12 [72][73]. - **International Bond Yields**: As of December 19, 2025, the yields of 10 - year treasury bonds in the US, Japan, the UK, and Germany were 4.16%, 2.02%, 4.53%, and 2.98% respectively, a decrease of 3 BP, an increase of 7 BP, an increase of 3 BP, and an increase of 4 BP respectively compared to December 12 [80]. - **Exchange Rate**: On December 19, the central parity rate and spot exchange rate of the US dollar against the Chinese yuan were 7.06 and 7.04 respectively, a decrease of 88 and 144 pips respectively compared to December 12 [82]. 3.4 Investment Suggestions The bond market in 2026 may perform better than expected. Since the second half of the year, the bond market has often deviated from the fundamentals and is dominated by institutional behavior. It is expected that the policy interest rate will be cut by about 20 BP in 2026, with a 10 - BP cut likely in Q1. In the long - term, the yield of 30 - year treasury bonds is closely related to the population structure, and it is predicted that the yield of 30 - year treasury bonds will fall below 2% in 2026. Different from the unanimous bullish sentiment of institutions a year ago, many non - bank institutions are currently bearish on the bond market, so the bond market in 2026 may perform better than expected. Currently, it is recommended to focus on the allocation value of 5 - year bank capital bonds and ultra - long - term interest - rate bonds [4][86].

Core Insights - The Chinese real estate market is undergoing a significant transformation, marked by a surge in mortgage defaults and a dramatic increase in the number of foreclosed properties, which is projected to exceed 3.5 million this year [1][3]. Group 1: Causes of Mortgage Defaults - The sharp decline in property prices has led to a "roller coaster" effect for investors, prompting many to abandon their properties to mitigate losses as prices have dropped by as much as 30% in some areas [5][7]. - Economic pressures have intensified, with many households facing reduced incomes or unemployment, making it increasingly difficult to meet mortgage obligations [7]. - Impulsive investment decisions made during the property price boom have resulted in regret as falling prices and rising financial burdens lead some homeowners to choose default as a way out [5][7]. Group 2: Industry Implications - The difficulty in selling properties has increased, with developers resorting to significant discounts, and the number of second-hand homes listed for sale has surged by 25% in key cities [9]. - The rising number of foreclosed properties poses a challenge for banks, as the value of down payments diminishes and the ability to liquidate these assets becomes increasingly difficult [10]. - The potential for accelerated property tax reforms is emerging as a response to the growing number of defaults and market instability, indicating a shift towards more stringent regulatory measures [11].