Core Viewpoint - Citic Securities indicates that in April, there is a liquidity gap due to government bond financing, seasonal fluctuations in M0, and an expanded base for reserve requirements [1] Group 1 - The liquidity gap is attributed to several factors including government bond financing and seasonal M0 fluctuations [1] - The impact of large-scale foreign exchange settlements on liquidity is highlighted as a significant concern [1] - If commercial banks continue to settle foreign exchange without the central bank purchasing foreign currency, the funding environment may face friction [1] Group 2 - The central bank may need to use other monetary policy tools to counteract the potential liquidity issues arising from these factors [1]

Group 1 - The core viewpoint of the report indicates that there is a liquidity gap in April due to factors such as government bond financing, seasonal fluctuations in M0, and an expanded base for reserve requirements [1] - The report emphasizes that the impact of large-scale foreign exchange settlements on liquidity is a more critical concern [1] - If commercial banks continue to settle foreign exchange without the central bank purchasing foreign currency, the funding environment may face friction, necessitating the central bank to use other monetary policy tools to counteract this [1]

1. Report Industry Investment Rating No information provided in the report regarding the industry investment rating. 2. Core Viewpoints of the Report - In February 2026, the central bank slowed down its bond - buying pace and lowered the forward foreign exchange sales risk reserve ratio. The overall liquidity in February was stable during the Spring Festival, and the capital performance before the Spring Festival was more stable under the central bank's active support. The capital gap in March is not significant, and the central bank is expected to maintain a relatively active investment state [1][3][4]. - The impact of exchange - rate appreciation on liquidity is basically offset. The central bank's reduction of the forward foreign exchange sales risk reserve ratio to 0% will help ease the RMB appreciation rate. The inter - bank self - regulatory supervision may be further refined, and in the short term, some banks may use certificates of deposit to undertake, which is beneficial for banks to reduce liability costs in the long term [5][74][78]. 3. Summary by Directory 2.1 February Capital and Liquidity Review: Stable across the Spring Festival 2.1.1 Capital Review: Narrow - range Fluctuation of Capital - In February 2026, the overnight capital fluctuation range narrowed compared with the previous month, and the 7D capital fluctuation range slightly expanded. The overnight capital fluctuated within a range of 0.12%, and the 7D capital basically ran stably between 1.45% - 1.55%. There was no inversion between overnight and 7D capital this month [12]. - At the beginning of the month, 70 billion yuan of 3M repurchase expired, and the central bank over - renewed 10 billion yuan. From February 5th to 12th, the central bank injected 1.4 trillion yuan of short - term funds through 14 - day reverse repurchase. On the 13th, the central bank over - renewed 50 billion yuan of 6M repurchase. Affected by factors such as pre - holiday cash withdrawal, government bond issuance, and new share subscriptions on the Beijing Stock Exchange, the capital price fluctuated briefly, with DR007 rising to 1.55%. By the end of the month, the capital market remained stable [13]. - The capital stratification pressure in February was at a seasonal low. The volatility of the spread between R007 and DR007 during the Spring Festival was smoothed out, and the spread between GC007 and DR007 rose from about 5bp at the beginning of the month to 10bp at the end of the month, both at seasonal lows [20]. - The volatility of overnight and 7D capital was at a seasonal low. The daily average trading volume of inter - bank pledged repurchase in February decreased compared with the previous month, with a monthly total of about 117 trillion yuan. The net lending scale of banks decreased, and the net lending scale of money market funds was relatively low [26][27][30]. 2.1.2 Liquidity Review: Temporary Consumption of Liquidity by Government Bond Payment and Spring Festival Cash Withdrawal - **Liquidity Aggregate**: In February, the base money increased by about 63 billion yuan. The government deposit consumed about 24 billion yuan of base money, the central bank's net investment was 82.19 billion yuan, and foreign exchange funds had a net investment of 5 billion yuan. After considering factors such as reserve freezing, cash withdrawal, and non - financial institution deposit changes, the excess reserve at the end of the month decreased by about 500 billion yuan, and the excess reserve ratio was about 0.93%, at a seasonal low. The narrow - sense excess reserve level after deducting reverse repurchase was about 0.37%, close to the seasonal level [32]. - **Open - market Operations**: In February, the central bank slightly withdrew short - term reverse repurchase in the open market, with a net investment of - 12.05 billion yuan and a reverse repurchase balance of 164 billion yuan at the end of the month, at a seasonal neutral level. The MLF investment was 60 billion yuan, with 30 billion yuan due, and the MLF balance was 7.25 trillion yuan. The net investment of 3M and 6M repurchase was 60 billion yuan, with a balance of 7.4 trillion yuan. The central bank's net purchase of government bonds was 5 billion yuan, 5 billion yuan less than the previous month. Other tools included a 15 - billion - yuan treasury time - deposit operation, with 15 billion yuan due, and PSL and other structural tools had an investment of 0 billion yuan and - 7.6 billion yuan respectively [34][40][43]. 2.2 February Monetary Policy Tracking: Slower Bond - buying Pace by the Central Bank and Lowered Forward Foreign Exchange Sales Risk Reserve Ratio - The central bank's bond - buying scale in February decreased to about 5 billion yuan, slightly lower than market expectations. The 10 - year government bond yield was relatively low, and the decrease in the central bank's bond - buying volume may reflect a relatively cautious attitude [50]. - The fourth - quarter monetary policy meeting in 2025 continued the moderately loose tone, with relatively limited incremental information. The central bank emphasized guiding short - term interest rates to operate around policy rates. The central bank decided to lower the forward foreign exchange sales risk reserve ratio from 20% to 0% starting from March 2nd to ease the RMB appreciation expectation [49][54]. 2.3 March Gap Prediction: Limited Capital Gap Pressure 2.3.1 Rigid Gap: Slight Consumption of Excess Reserves by Reserve Requirements and Slight Recovery of 3M Repurchase - In March, as it is a large - deposit month, the increase in general deposits will consume about 44 billion yuan of excess reserves. The MLF due amount is 45 billion yuan, slightly larger than the previous month. The total due amount of repurchase in March is 1.6 trillion yuan, including 1 trillion yuan for 3M and 600 billion yuan for 6M. Currently, 80 billion yuan of 3M repurchase has been renewed [58]. 2.3.2 Exogenous Shocks: Post - holiday Return of Cash Withdrawal and Non - financial Institution Deposits - Referring to previous years with a late Spring Festival, the "currency issuance" item in the central bank's statement may supplement about 44.07 billion yuan of excess reserves in March. The non - financial institution deposits may also supplement about 10.55 billion yuan of excess reserves [63]. 2.3.3 Fiscal Factors: Limited Government Bond Issuance and Season - end Fiscal Expenditure as a Benefit - Considering factors such as bond payment, tax revenue, and fiscal expenditure, the government deposit is expected to supplement about 64.15 billion yuan of liquidity in March [64]. 2.3.4 Comprehensive Judgment: Limited Season - end Liquidity Pressure - Overall, the capital gap in March is not significant. The main pressures come from quarter - end reserve requirements and tool maturities. Considering the central bank's current operation ideas, it is expected to maintain a relatively active investment state, and the capital pressure is limited [67]. 2.4 Other Factors - The impact of exchange - rate appreciation on liquidity is basically offset. The increase in market settlement demand leads to an increase in RMB deposits, and the reserve requirements freeze about 74.4 billion yuan of liquidity. However, the central bank's foreign exchange funds increased by 5 billion yuan in January, which basically offsets the impact on narrow - sense liquidity [5][72]. - The central bank's reduction of the forward foreign exchange sales risk reserve ratio to 0% will help ease the RMB appreciation rate. The inter - bank self - regulatory supervision may be further refined. If high - interest inter - bank deposits are reduced, banks may use certificates of deposit as a substitute. If the supply demand for certificates of deposit increases in March, the pricing may be slightly adjusted upwards, but the adjustment range is relatively controllable [74][78].

Core Viewpoint - The recent acceleration of the RMB appreciation since late January 2026 has prompted the central bank to lower the foreign exchange risk reserve ratio on February 27, aiming to curb the rapid appreciation and stimulate forward foreign exchange demand [2][6]. Group 1: Reasons for Recent RMB Appreciation - Since the beginning of 2026, the RMB has continued to strengthen, with a notable acceleration since late January, breaking the 6.83 mark against the USD and approaching 6.80 [3][6]. - The annualized appreciation rate of the RMB against the USD accelerated to 24.6% in February, a historically rare occurrence, driven by seasonal settlement and a weaker USD [3][6]. - There are signs of a "panic settlement" effect, with high trading volumes indicating that the settlement trend may continue despite seasonal declines [3][18]. Group 2: Central Bank's Intervention - The central bank's decision to lower the foreign exchange risk reserve ratio from 20% to 0% is intended to provide a policy signal and stimulate forward foreign exchange purchases to alleviate the rapid appreciation of the RMB [4][67]. - Historical instances of similar interventions in September 2017 and October 2020 show that while these measures can smooth out the pace of appreciation, they have limited impact on the overall trend [4][67]. - The effectiveness of the recent adjustment may be constrained by banks' willingness to pass on cost savings to enterprises and the actual changes in purchasing behavior influenced by exchange rate expectations [29][67]. Group 3: Future Exchange Rate Trends - In the short term, the central bank's actions may lead to a temporary adjustment in the exchange rate, with historical data indicating that similar past interventions resulted in short-term adjustments of 3.2% and 0.4% over 15 and 3 trading days, respectively [5][40]. - The medium-term outlook suggests that market forces will continue to dominate the exchange rate, with the potential for sustained appreciation due to a larger "waiting to settle" scale and healthier fundamental conditions compared to previous cycles [5][60]. - Factors such as potential USD rebounds and increased trade tensions may affect the pace of RMB appreciation but are unlikely to reverse the long-term trend of steady appreciation [5][60].

1. Report Industry Investment Rating - Not provided in the content 2. Core Viewpoints of the Report - Since the beginning of 2026, the RMB has continued to strengthen, and there has been an acceleration since late January. The annualized appreciation rate of the RMB against the US dollar has accelerated to 24.6% since February, which is quite rare in history. The early stage of this round of appreciation was the result of the resonance of seasonal foreign exchange settlement and the weakening of the US dollar, but the further acceleration since late January has shown signs of "panic foreign exchange settlement" [2][63]. - On February 27, the central bank announced to lower the foreign exchange risk reserve ratio from 20% to 0% to boost the forward foreign exchange purchase demand of enterprises and alleviate the one - sided and rapid appreciation of the exchange rate. However, looking back at history, the central bank's regulatory tools mainly play a role in "adjusting the rhythm" and have relatively limited impact on the trend. If the RMB continues to appreciate, the foreign exchange deposit reserve ratio and cross - border financing macro - prudential parameters may also be used [3][63]. - In the short term, the central bank's "smoothing" operation may bring about a phased adjustment of the exchange rate, and there has been some "divergence" in the financial market. After the central bank lowered the foreign exchange risk reserve in September 2017 and October 2020, the RMB exchange rate adjusted by 3.2% and 0.4% respectively, lasting for 15 and 3 trading days. The options market has shown some "loosening" [4][63]. - In the medium term, the exchange rate trend is still dominated by market forces, and the appreciation may continue to some extent. Among the 9 rounds of RMB appreciation since the "811" exchange rate reform in 2015, the one in the second half of 2021 is similar to this round. Compared with that, the scale of "pending foreign exchange settlement" in this round is larger and the fundamental environment is healthier, which may mean that the appreciation still has some continuity. The possible rebound of the US dollar and the intensification of trade frictions may affect the appreciation rhythm of the RMB, but may not reverse the steady appreciation rhythm of the RMB exchange rate in the medium and long term [4][66]. 3. Summary According to the Directory 3.1 Hot Topic Thinking: Is the RMB Appreciation at a "Pause" or a "Variation"? 3.1.1 Why has the RMB Accelerated its Appreciation Recently? The "Herd Effect" of Foreign Exchange Settlement May be Emerging under Continuous Appreciation - Since the beginning of 2026, the RMB has continued to strengthen, and there has been an acceleration since late January. As of February 27, 2026, the offshore RMB once broke through the 6.83 mark and approached 6.80. From the perspective of the entire appreciation cycle, the appreciation from May to November 2025 was relatively stable, with an annualized appreciation rate of about 2.7%. However, since December, the appreciation speed has significantly accelerated, and the annualized appreciation rate has accelerated to 24.6% since February [2][12]. - The appreciation in January was the result of the resonance of the "year - end foreign exchange settlement tide" and the weakening of the US dollar. On the one hand, the "delayed" Spring Festival in February led to the continuation of the improvement of the foreign exchange settlement rate in January. The foreign exchange settlement rates in December 2025 and January 2026 were 61% and 59% respectively, both the highest values for the same months since 2017. The bank's customer foreign exchange settlement and sales surplus reached new highs and second - highs since the "811" exchange rate reform. On the other hand, the weakening of the US dollar also contributed, which was mainly driven by concerns about the intervention of the Japanese Ministry of Finance due to the continuous weakness of the Japanese yen exchange rate and the impact of issues such as the "Greenland Island" incident provoked by Trump [16]. - The further acceleration of appreciation since late January has shown signs of a "herd effect" and "panic defense". Since January 27, the US dollar has appreciated by 1.9%, while the RMB against the US dollar has still strengthened by 1.5%. High - frequency data shows that the inquiry trading volume of the US dollar against the RMB has remained at a relatively high level, indicating that the "foreign exchange settlement tide" may continue after the seasonal decline. The decline of the swap point spread in the "foreign exchange settlement tide" may be due to the further increase of the forward foreign exchange settlement rate, which reflects that the enterprise's "unilateral consensus" is gradually strengthening [23]. 3.1.2 Will the Central Bank's "Intervention" Reverse the Trend? Looking Back at History, it Will Smooth the Rhythm but is Difficult to Change the Trend - On February 27, 2026, the central bank announced to lower the foreign exchange risk reserve ratio for forward foreign exchange sales business from 20% to 0%. This tool aims to boost the forward foreign exchange purchase demand of enterprises to alleviate the one - sided and rapid appreciation of the exchange rate. From a mechanism perspective, lowering the foreign exchange risk reserve ratio has two meanings: signaling and supply - demand adjustment. However, looking at the two previous downward adjustments in September 2017 and October 2020, the effect of supply - demand adjustment mainly drives the continuation of the rebound rhythm of forward foreign exchange purchases, and the actual scale of foreign exchange purchases driven is relatively limited [27]. - This operation is a continuation of the central bank's counter - cyclical adjustment in the context of the rapid appreciation of the exchange rate. In the future, tools such as the cross - border financing macro - prudential adjustment parameter and the foreign exchange deposit reserve ratio may also be used. Looking back at history, if the RMB exchange rate continues to appreciate, these tools may be activated. Overall, the central bank's regulatory tools for the foreign exchange market mainly play a role in "adjusting the rhythm" and have relatively limited impact on the overall trend [30][35]. 3.1.3 How will the Exchange Rate Evolve in the Future? There May be a Phased Adjustment in the Short Term, and a Steady Appreciation Trend may Continue in the Medium and Long Term - In the short term, the central bank's "smoothing" operation may bring about a phased adjustment, and there has been some "divergence" in the financial market. Historically, after the central bank lowered the foreign exchange risk reserve in September 2017 and October 2020, the RMB exchange rate adjusted by 3.2% and 0.4% respectively, lasting for 15 and 3 trading days. The options market has shown some "loosening", with the 3 - month at - the - money option implied volatility rising slightly since January and the 25 - delta risk reversal factor rising continuously since January and turning positive again, indicating that some funds are using options to defend against the risk of RMB weakening [41]. - In the medium term, the exchange rate trend may still be dominated by market forces, and the second half of the appreciation cycle from 2020 to 2021 can be used as a reference. Compared with 2021, the scale of "pending foreign exchange settlement" in this round is larger and the fundamental environment is healthier, which may mean that the appreciation in the medium - and long - term perspective still has some continuity. Possible future events such as the rebound of the US dollar and the intensification of trade frictions may affect the appreciation rhythm of the RMB, but may not reverse the steady appreciation rhythm of the RMB exchange rate in the medium and long term [46][54]. 3.2 Large - scale Assets & Overseas Events & Data: The Three Major US Stock Indexes Fell Collectively, and the Prices of Gold and Silver Rose in Resonance 3.2.1 Large - scale Assets: The Three Major US Stock Indexes Fell Collectively, and the Prices of Gold and Silver Rose in Resonance - During the week, most developed - market stock indexes and emerging - market stock indexes rose. Among developed - market stock indexes, the Nikkei 225, the UK FTSE 100, and the Australian All Ordinaries Index rose by 3.6%, 2.1%, and 1.4% respectively. Among emerging - market stock indexes, the South Korean KOSPI, the Thai SET Index, and the Ho Chi Minh Index rose by 7.5%, 3.3%, and 3.1% respectively, while the Cairo CASE30, the Indian SENSEX30, and the Brazilian BOVESPA Index fell by 2.9%, 1.8%, and 0.9% respectively [67]. - Most sectors of the US S&P 500 rose during the week. The utilities, consumer staples, and healthcare sectors rose by 2.9%, 2.7%, and 2.1% respectively, while the information technology, financial, and consumer discretionary sectors fell by 2.2%, 2.0%, and 0.5% respectively. Most sectors in the eurozone also rose. The utilities, energy, and communication services sectors rose by 5.3%, 3.1%, and 2.9% respectively, while the healthcare, technology, and non - essential consumer sectors fell by 1.9%, 0.7%, and 0.6% respectively [69]. - The Hang Seng Index mostly fell during the week, but most sectors rose. The Hang Seng Tech Index and the Hang Seng China Enterprises Index fell by 1.4% and 1.1% respectively, while the Hang Seng Index rose by 0.8%. Among sectors, the raw materials, finance, and real estate construction sectors rose by 4.8%, 2.9%, and 2.8% respectively, while the healthcare, non - essential consumer, and information technology sectors fell by 5.0%, 1.8%, and 1.0% respectively [73]. - The 10 - year government bond yields of most developed countries declined during the week. The 10 - year US Treasury yield fell 11.0bp to 3.97%, the German 10 - year government bond yield fell 5.0bp to 2.76%, the UK 10 - year government bond yield fell 0.88bp to 4.36%, the French 10 - year government bond yield fell 8.4bp to 3.22%, the Italian 10 - year government bond yield fell 7.2bp to 3.28%, and the Japanese 10 - year government bond yield rose 4.3bp to 2.17% [75]. - The 10 - year government bond yields of most emerging markets declined during the week. Brazil's yield fell 10.6bp to 13.43%, India's fell 6.4bp to 6.66%, Vietnam's fell 0.3bp to 4.25%, South Africa's fell 2.5bp to 7.97%, Thailand's fell 17.3bp to 1.72%, and only Turkey's rose 207.0bp to 30.23% [78]. - The US dollar index declined during the week, and most other currencies appreciated against the US dollar. The US dollar index fell 0.1% to 97.64, the euro appreciated 0.3% against the US dollar, the pound sterling appreciated 0.5% against the US dollar, the Canadian dollar appreciated 0.3% against the US dollar, and the Japanese yen depreciated 0.7% against the US dollar. Most major emerging - market currencies appreciated against the US dollar. The Brazilian real appreciated 0.9% against the US dollar, the Philippine peso appreciated 0.7% against the US dollar, the South Korean won appreciated 0.5% against the US dollar, the Indonesian rupiah appreciated 0.4% against the US dollar, the Egyptian pound depreciated 0.8% against the US dollar, the Mexican peso depreciated 0.5% against the US dollar, and the Turkish lira depreciated 0.2% against the US dollar [80]. - The RMB appreciated against the US dollar during the week. The exchange rates of the US dollar against the on - shore and offshore RMB changed to 6.8559 and 6.8612 respectively. The Japanese yen depreciated 2.3% against the RMB, the pound sterling depreciated 1.7% against the RMB, and the euro depreciated 1.3% against the RMB [86]. - Most commodity prices rose during the week. Brent crude oil prices rose 1.0% to $72.5 per barrel, WTI crude oil prices rose 0.8% to $67.0 per barrel, LME nickel prices rose 3.2% to $17,880 per ton, glass prices rose 2.0% to 1,062 yuan per ton, and hog prices fell 0.1% to 11,485 yuan per ton. Non - ferrous metal prices and precious metal prices all rose. LME aluminum rose 2.8% to $3,163 per ton, LME copper rose 5.2% to $13,482 per ton, inflation expectations fell 3bp to 2.25%, COMEX silver prices rose 11.1% to $93.8 per ounce, COMEX gold prices rose 4.1% to $5,280.0 per ounce, and the real yield of the 10 - year US Treasury fell 8bp to 1.72% [90][95]. 3.2.2 US Treasury Bonds: The TGA Scale Declined, and the Net Issuance of US Treasury Bonds Declined - As of February 25, 2026, the US TGA balance dropped to $839 billion, significantly lower than at the end of January 2026. During the week (from February 23 to February 25, 2026), the net issuance of US Treasury bonds was flat compared with the previous week, with short - term Treasury bonds being issued at a relatively high scale on multiple days. The 15 - day rolling net issuance of US Treasury bonds recently dropped to $11.424 billion [99]. 3.2.3 US Fiscal Situation: The Cumulative US Fiscal Deficit Reached $250.4 Billion - As of February 24, 2026, the cumulative US fiscal deficit in the 2026 calendar year was $250.4 billion, compared with $303.6 billion in the same period last year. The cumulative expenditure was $1.2411 trillion, compared with $1.1822 trillion in the same period last year. The cumulative fiscal tax revenue was $782.8 billion, compared with $710.4 billion in the same period last year. The tariff revenue was $58.1 billion, compared with $11.3 billion in the same period last year [103]. 3.2.4 Federal Reserve: Waller Believes that the March Decision will Depend on the February Employment Data - In the past week, the public statements of Federal Reserve officials mainly focused on economic outlook, labor market signals, the impact of AI/productivity, inflation stickiness, and monetary policy stance, maintaining the cautious and data - dependent characteristics after the January FOMC meeting. Waller believes that the March decision will depend on the February employment data. Goolsbee believes that further progress in inflation is needed, and Barkin does not think that the Supreme Court's decision will have a significant impact on the inflation trend [109]. 3.2.5 PPI: The US PPI in January was Stronger than Expected - The US PPI (final demand) in January was 2.9% year - on - year and 0.5% month - on - month, stronger than market expectations. The contribution of the service component to the PPI increased, mainly driven by sub - items such as trade services, which may mean that the US PCE inflation faces upward pressure [115]. 3.2.6 Retail Sales: Japan's Retail Sales in January were Stronger than Expected - Japan's retail sales in January increased by 4.1% month - on - month, compared with a market expectation of 1.5%, and 1.8% year - on - year, compared with a market expectation of 0.1%. In terms of the month - on - month structure, the year - on - year growth rates of machinery and equipment and motor vehicles in January reached 12.4% and 9.6% respectively, which may be related to the fiscal stimulus measures introduced by the Japanese government [118]. 3.2.7 High - frequency Data: The Number of Unemployment Insurance Claims was Lower than Market Expectations - As of the week ending February 21, the initial unemployment insurance claims in the US were 212,000, lower than the market expectation of 216,000. As of the week ending February 14, the continued unemployment insurance claims were 1.833 million, lower than the market expectation of 1.858 million (both on a seasonally adjusted basis). From a non - seasonally adjusted perspective, the data of the two types of unemployment insurance claims in the US are in line with historical patterns [121]. 3.3 Global Macroeconomic Calendar: Pay Attention to the US Non - farm Payrolls - The report provides a global macroeconomic data calendar, highlighting the need to pay attention to the US non - farm payrolls data [131].

Core Viewpoint - The recent appreciation of the offshore RMB is primarily driven by domestic factors, particularly the strong demand from export enterprises and the continuous inflow of foreign capital, rather than a weakening of the US dollar [1][14][27]. Group 1: Factors Driving RMB Appreciation - The main buying force behind the RMB's appreciation is domestic export enterprises, which have accumulated significant amounts of USD due to China's high trade surplus, projected at approximately 1.2 trillion USD in 2025 [3][27]. - Many enterprises are converting their USD holdings into RMB in anticipation of further appreciation, leading to a concentrated demand for RMB [6][8]. - Foreign capital has also played a crucial role, with international institutions like BlackRock and JPMorgan increasing their investments in RMB assets, attracted by China's economic resilience and the long-term growth potential of its capital markets [10][12]. Group 2: Market Dynamics and Expectations - The expectation of continued RMB strength has created a positive feedback loop, encouraging both enterprises and institutions to buy and hold RMB [16][27]. - The trading volume in the domestic foreign exchange market remains high, indicating stable participation from various market players without irrational trading behavior [16]. - The RMB's appreciation is supported by real demand rather than speculative activities, reflecting growing international confidence in the Chinese economy [29]. Group 3: Implications of RMB Appreciation - For ordinary consumers, the appreciation of the RMB means lower costs for foreign currency exchanges, benefiting those with overseas study or travel needs [20]. - Imported goods, such as electronics and baby formula, may see price reductions due to lower import costs from RMB appreciation [22]. - However, low-margin export sectors, like textiles and toys, may face profit pressures due to the stronger RMB, potentially leading to losses for some companies [22][24]. Group 4: Future Outlook - The RMB's appreciation is not expected to be a one-sided trend; it will likely experience fluctuations influenced by China's economic fundamentals, USD movements, and foreign capital flows [24][26]. - The Chinese government aims to maintain a stable RMB exchange rate to support normal operations of foreign trade enterprises and protect the financial interests of ordinary citizens [26].

Group 1 - The core viewpoint of the article is that the Chinese Yuan (RMB) has maintained an appreciation trend for five consecutive months, with a rapid appreciation rate in the recent quarter, returning to the "6" era since the beginning of 2026. As of February 25, the offshore RMB exchange rate (USDCNH) reached 6.8588, showing strong performance compared to the US dollar, second only to the Australian dollar [1][7][35] - The RMB's appreciation can be divided into three phases: the "trend-following" phase (November 1 to December 14, 2025), the "self-driven" phase (December 15, 2025, to January 28, 2026), and the "multi-factor resonance" phase (from January 28, 2026, to present). The correlation coefficient between the offshore RMB exchange rate and the US dollar index has varied significantly across these phases [10][12][42] Group 2 - The driving factors behind the RMB's appreciation since 2026 include: (1) a renewed narrative of de-dollarization, leading to a collective rise of non-USD currencies; (2) a significant increase in the proportion of trade surplus converted into actual receipts, reaching approximately 77.6%, the highest in nearly a decade; (3) a rebound in domestic Producer Price Index (PPI) and a strong start in the stock market [2][12][55][61] - Seasonal factors are expected to stabilize the RMB post-Spring Festival, including a shift towards a weaker central parity since late January, a decline in seasonal settlement demand, and a potential return to mean volatility after a period of unilateral appreciation [3][18][67] Group 3 - The RMB's appreciation is supported by nominal growth improvements, with stable credit data and rising inflation indicators. The estimated remaining amount for settlement from 2022 to 2026 is between $725 billion and $1.14 trillion, with a significant portion of holdings in a "floating loss" state, indicating that the current settlement trend may not be short-term [4][24][26] - The RMB exchange rate is expected to maintain a slight appreciation trend throughout 2026, with a projected year-end range of 6.85 to 6.87. This is part of a new appreciation cycle driven by improvements in China's nominal growth and technological breakthroughs [5][28][32]

Group 1 - The core viewpoint of the article is that the Chinese yuan has returned to an appreciation trend, with the USD/CNY midpoint reaching a new low since May 2023 at 6.9523, approaching the critical level of 6.95 [1][10]. - The appreciation of the yuan began to accelerate in December last year, with a monthly increase of approximately 900 pips, followed by an additional 500 pips in January [2]. - The yuan's appreciation characteristics can be summarized as "self-driven," where the yuan gains momentum when the US dollar index declines, and experiences limited adjustments when the index rises [4][6]. Group 2 - The USD/CNY midpoint has been on a downward trend for eight consecutive months since the peak of the trade war in April last year, returning to a trajectory that aligns with market appreciation rates [5]. - There is a consensus among enterprises to adjust their currency exchange strategies flexibly, moving away from fixed points to follow market trends [7]. - Potential risks before and after the Spring Festival include supply-demand imbalances due to pre-holiday settlement pressures, with the possibility of the USD/CNY rate dropping to the 6.9 level [8]. Group 3 - Key data releases, including January's non-farm payrolls and CPI, could catalyze market movements, especially with the upcoming long Spring Festival holiday, which may increase volatility [8]. - The article notes that the longest Spring Festival holiday in history, lasting nine days, could yield a carry return of 50 pips, leading to speculative trading that may amplify market fluctuations [8][10]. - The article concludes that the appreciation of the yuan may not be over before the Spring Festival, and that adjusting exchange rates at higher levels is a reasonable strategy [10].

1. Report Industry Investment Rating - Not mentioned in the provided content 2. Core Viewpoints - The impact of corporate foreign exchange settlement with banks on the capital market is slightly negative, while banks' foreign exchange settlement with the central bank significantly benefits the capital market. Attention should be paid to changes in the central bank's operations. Foreign exchange settlement can relieve the pressure of insufficient general deposits in banks and support certificate of deposit (CD) interest rates. The key influencing factors are the rhythm of banks' foreign exchange settlement with the central bank and changes in the central bank's investment scale [5][8][10]. - Last week, the bond market continued its recovery, with interest rates, especially long - term yields, dropping rapidly. The stock market sentiment was suppressed, and the central bank's net investment was large. Short - term trading was crowded initially, and then institutions shifted to long - term bonds, driving down long - term interest rates [5][41]. - In terms of high - frequency data, most production - side operating rates declined, demand - side indicators such as passenger car sales and real estate transactions were weak, and price trends were mixed [5][48][49]. 3. Summary by Directory 3.1 Bond Market Weekly Viewpoint - The impact of foreign exchange settlement on the capital market and CD interest rates is positive. Theoretically, as long as the proportion of banks' foreign exchange settlement with the central bank exceeds the legal deposit reserve ratio (currently 6.3%), foreign exchange settlement benefits the capital market. The actual data also shows a correlation where more foreign exchange settlement leads to a looser capital market [5][10][12]. - Foreign exchange settlement increases the general deposit scale of banks, relieves CD financing pressure, and thus supports CD interest rates [10]. 3.2 This Week's Focus in the Fixed - Income Market - This week, China will release January PMI. The US, Canada, and the Eurozone will also announce relevant economic data and central bank decisions [13][14]. - This week, the planned issuance of interest - rate bonds is expected to be around 609.3 billion yuan, including 439.3 billion yuan of local bonds and about 170 billion yuan of policy - bank bonds, with no planned issuance of national bonds [14][16]. 3.3 Review and Outlook of Interest - Rate Bonds 3.3.1 High - Level Open - Market Operations - Last week, the central bank's open - market operations had a high investment scale. Reverse repurchase investment first increased and then decreased, with a total investment of about 1.18 trillion yuan and a net investment of 229.5 billion yuan. MLF had a maturity of 200 billion yuan last week, and 900 billion yuan was invested, maintaining a high net investment in medium - and long - term liquidity. Considering the maturity of treasury deposits of 150 billion yuan, the total net investment in open - market operations last week was 979.5 billion yuan [20][22]. - The capital market fluctuated significantly, with capital interest rates mostly rising. Repurchase trading volume fluctuated, and overnight interest rates and DR007 both increased [22][23]. - CD prices adjusted according to the market, and secondary yields dropped rapidly. The net financing of CDs last week was - 116.9 billion yuan. The proportion of medium - term CDs increased, and long - term proportions decreased. Secondary yields of most CDs declined [29]. 3.3.2 Continued Sharp Decline in Bond Market Interest Rates - Last week, the bond market's recovery sentiment continued, with long - term yields dropping rapidly. The 10 - year treasury bond and CDB active bonds decreased by - 1.1bp and - 2.9bp respectively compared to the previous week. Most yields of interest - rate bonds at various maturities declined, except for the 1 - year treasury bond, which rebounded by about 4bp. The 10 - year CDB bond yield had the largest decline, about 4.2bp [5][41]. 3.4 High - Frequency Data - On the production side, most operating rates declined, including blast furnace, PTA, and asphalt operating rates, while the semi - steel tire operating rate increased. The daily average crude steel output in early January had a narrowing year - on - year decline [48]. - On the demand side, passenger car wholesale and retail sales continued to have a large year - on - year decline. The real estate market was weak, with a significant year - on - year decline in the transaction area of commercial housing. Export indices also decreased [48]. - In terms of prices, crude oil prices continued to rise, copper and aluminum prices diverged, and coal prices showed different trends. The prices of mid - stream building materials declined, and the prices of downstream consumer products such as vegetables and pork showed different changes [49].

Core Viewpoint - The recent strengthening of the RMB exchange rate is significantly influenced by seasonal demand for foreign exchange settlements in December, driven by increased corporate funding needs at year-end [1] Group 1: Exchange Rate Dynamics - The average appreciation of the RMB against the USD in December and January is 0.5% and 0.8% respectively, with appreciation probabilities of 75% and 67% [1] - The seasonal acceleration in foreign exchange settlement demand is a key factor contributing to the recent strengthening of the RMB [1] Group 2: Financial Cycle Perspective - Beyond trade considerations, it is essential to evaluate the exchange rate from a financial cycle perspective [1]