Economic Overview - In October, major economic indicators in China fell short of market expectations, with industrial added value growing by 4.9% year-on-year (expected 5.2%) and the service production index increasing by 4.6% [1][6] - Fixed asset investment showed a cumulative decline of 1.7% year-on-year (expected -0.7%), with infrastructure and manufacturing growth rates at 1.5% and 2.7% respectively, both below expectations [1][6] Consumption - Retail sales growth was 2.9% year-on-year, slightly down from the previous month, with significant structural changes observed [7] - Durable goods consumption weakened, particularly in the automotive and home appliance sectors, with automotive sales down 6.6% year-on-year [7] - Service consumption, particularly in the restaurant sector, showed improvement, with restaurant service consumption growth rising to 3.8% [7][8] Fixed Asset Investment - Fixed asset investment declined by 1.7% in October, with significant drops in real estate investment at -14.7% and manufacturing investment at -6.7% [11][14] - Real estate sales saw a notable decrease, with sales area and amount down 18.8% and 24.3% respectively [11] - Infrastructure investment continued to contract, with a year-on-year decline of 12.1% [12] Trade - Exports in October saw a significant drop, with a year-on-year decrease of 1.1% in dollar terms, marking the first negative growth since February 2025 [16] - Imports also slowed to a growth rate of 1.0%, indicating weak domestic demand [19] Supply Side - Industrial production growth slowed, with the industrial added value increasing by only 4.9%, below market expectations [22] - The manufacturing PMI fell to 49.7, indicating contraction for the first time since April [22] Inflation - CPI turned positive at 0.2%, the highest since February, while core CPI inflation rose to 1.2% [23][24] - PPI showed a slight recovery, with a year-on-year decline narrowing to 2.1% [24] Forward Outlook - The necessity for policy support has increased, with multiple incremental policies expected to take effect in November and December to boost infrastructure and manufacturing investment [27]

1. Report Industry Investment Rating - No information provided regarding the industry investment rating in the given content 2. Core View of the Report - In September 2025, the year - on - year declines of CPI and PPI narrowed, and inflation continued to recover. CPI was dragged down by food and energy sub - items, but the year - on - year growth of core CPI returned to 1%, and consumer goods prices recovered. PPI year - on - year continued to recover, with a slowdown in month - on - month growth, showing a characteristic that the upstream was better than the downstream. Overall, the price in September continued the recovery trend, and with the boost of policies in the fourth quarter, prices were expected to continue to recover. For the bond market, the internal "re - inflation" and policy trading logic would suppress the downward space of interest rates [5][6] 3. Summary According to Related Content CPI Analysis - Food and energy continued to drag down CPI year - on - year. The price drops of pork, fresh vegetables, eggs, and fresh fruits dragged down CPI year - on - year by 0.78pct, and the energy price drop dragged down CPI year - on - year by 0.2pct. The core CPI year - on - year accelerated its increase and returned to 1% after a year and a half. Service prices remained stable, with a year - on - year growth of 0.6%, the same as last month. In addition, the year - on - year decline of consumer goods prices in September narrowed by 0.2pct compared with last month, the first narrowing since June [2][3] PPI Analysis - PPI year - on - year continued to recover, and month - on - month growth slowed down, partly affected by imported factors such as crude oil, with the upstream performing better than the downstream. The year - on - year growth of ex - factory prices of production materials fully recovered. The year - on - year growth rates of mining, raw materials, and processing industries were - 9%, - 2.9%, and - 1.7% respectively, with growth rates increasing by 2.5pct, 1.2pct, and 0.5pct respectively compared with last month. The ex - factory prices of domestic coal, ferrous metals and other industries increased year - on - year continuously, while the ex - factory prices of domestic crude oil, chemical and other downstream industries were affected by the decline of international oil prices. The year - on - year growth of ex - factory prices of living materials remained stable, with the prices of daily necessities recovering and the prices of durable goods dragging down. In September, the year - on - year growth rates of food, clothing, daily necessities, and durable goods were - 1.7%, - 0.3%, 0.7%, and - 3.9% respectively, with growth rates remaining the same, decreasing by 0.3pct, increasing by 0.3pct, and decreasing by 0.2pct respectively compared with last month. The ex - factory prices of green and high - end industries increased year - on - year, such as aircraft manufacturing (1.4%), electronic special material manufacturing (1.2%), waste resource comprehensive utilization industry (0.9%), and wearable smart device manufacturing (0.1%) [4] Overall Outlook - In September, the price continued the recovery trend. Except for imported factors and the drag of some agricultural products, the internal "re - inflation" momentum was continuous and conductive. The market still had a strong expectation of "re - inflation" from the pricing of commodity futures contracts. With the boost of policies in the fourth quarter to the fundamentals and expectations, prices were expected to continue to recover. For the bond market, the internal "re - inflation" and policy trading logic would suppress the downward space of interest rates. Overseas risk events that were still undetermined recently had a short - term impact on the bond market. If returning to the internal narrative, if "re - inflation" was realized, the decline of real interest rates might have an "equivalent" effect of interest rate cuts, and the market should not have too high expectations for monetary easing [6]

Summary of Conference Call Records Industry Overview - The records primarily discuss the bond market, particularly focusing on local government bonds and the impact of VAT adjustments on pricing and investment strategies [1][2][4]. Key Points and Arguments 1. **Bond Market Dynamics** - Local government bond yields are converging, with a notable focus on older bonds that have higher coupons and better liquidity. New code bonds need to be reassessed for relative and absolute returns [1][3]. 2. **Impact of VAT on Bond Pricing** - Following the reintroduction of VAT, the pricing of bonds has shown a convergence in volatility. For instance, the yield range for 10-year government bonds has decreased from 1.70-1.75% to 1.68-1.72%, indicating a market in a waiting phase [2][7]. 3. **New Code Bonds Performance** - New code local government bonds are actively issued, with yields averaging 5 basis points higher than old code bonds. The pricing reflects a 3% VAT, primarily driven by proprietary trading desks, indicating a balance in tax burden sharing [4][6]. 4. **Liquidity and Spread Changes** - Both new and old local government bonds exhibit high liquidity, leading to a narrowing of spreads. The 30-year and 10-year government bonds are highlighted as having significant investment value due to their high spread positions [5][6]. 5. **Real Estate Market Insights** - The recent easing of real estate purchase restrictions in Beijing does not signal a new relaxation cycle. Existing policies are near their limits, and significant recovery in the real estate market is unlikely until 2026, requiring additional policy measures [6][7]. 6. **Inflation and Economic Stimulus** - Inflation recovery is expected to take time, with commodity prices reflecting more elasticity in futures rather than spot markets. Structural economic stimulus measures are deemed necessary for long-term stability [1][6]. 7. **Central Bank's Cautious Approach** - The central bank has shown caution in liquidity provision, with recent operations indicating a careful approach to market dynamics. The probability of funding rates dropping below 1.2% is considered low, reflecting a stable yet cautious monetary policy stance [2][7]. Other Important Insights - The market's risk appetite is diminishing, with a shift in focus from risk assets to bond market dynamics. The correlation between stock markets and bond markets has weakened, indicating a more cautious investment environment [2][3]. - The competition for older bonds is categorized into three types based on their issuance time, coupon rates, and liquidity, highlighting the strategic adjustments needed in investment approaches [3][4].