Core Viewpoint - The article discusses the disparity in valuation between Chinese banks and their international counterparts, emphasizing that the low valuations of Chinese banks do not align with their profitability and market contributions [2][4][6]. Group 1: Economic Context - China's economic development over the past 40 years has been remarkable, with a unique political and economic system that influences capital market pricing [2][3]. - The pricing of bonds in China follows a risk premium principle, with government bonds having the lowest interest rates due to their high credit quality [3]. Group 2: Bank Valuation Analysis - From 2010 to 2023, the profit contribution of the banking sector to A-share listed companies has consistently exceeded 39%, yet their market capitalization share has decreased from 15.0% to 8.7% [3]. - In 2024, the price-to-book (PB) ratio for major Chinese banks is 0.56, while for U.S. banks it is 1.4, indicating a significant valuation gap [4]. - The average PB ratio for global banks is 1.37, whereas A-shares and H-shares of Chinese banks are at 0.62 and 0.40, respectively, which is less than half of the global average [5]. Group 3: Market Perception and Mispricing - The market perceives low valuations for A-share listed banks due to expectations of declining asset growth, profitability, and concerns over risk management [6]. - The true reason for the low valuations is attributed to a denial of China's political and economic system, leading to a mispricing of bank stocks over the past decade [6]. - The article argues that the conditions for a valuation recovery of bank stocks are maturing, with stable loan growth and a potential shift in government policy [6].