Core Viewpoint - China's economy is currently facing a complex situation of short-term demand insufficiency and supply surplus, reflecting both cyclical fluctuations and structural imbalances during the industrial transformation process. The capital market serves as an economic "barometer," capturing supply-demand changes and providing forward-looking economic signals for decision-makers. The article suggests enhancing short-term demand management while deepening supply-side reforms to optimize macro-control using capital market signals, thereby improving the efficiency and quality of supply-demand dynamic balance [1]. Group 1: Current Imbalance of Total Supply and Demand - Since 2022, persistent low domestic prices and capital market price adjustments reflect issues of insufficient total demand and supply imbalance [2]. - Total demand remains weak, with both investment and consumption under pressure. As of April 2025, CPI has been low for 25 months, and PPI has experienced negative growth. The GDP deflator index has declined for eight consecutive quarters, indicating weak future demand expectations [3]. - Investment in real estate has led to a significant drop in related asset prices, with real estate development investment growth slowing since April 2022, causing related industries like black metal smelting and cement to experience negative price growth [3]. - Consumer spending is also affected by slowing income growth, with actual income growth decreasing from 8.2% in 2015 to 5.1% in 2024, and retail sales growth dropping from 10.4% in April 2015 to 4.7% in April 2025 [3]. Group 2: Structural Supply Imbalance - Traditional industries face overcapacity pressures, with industrial capacity utilization hovering around 75%, below the internationally recognized level of 80%. As of April 2025, indices for traditional cyclical industries like steel and chemicals have dropped by 27.7% and 31.1% respectively from their 2022 peaks [4]. - Emerging industries are experiencing rapid expansion alongside price declines, with significant price drops in sectors like photovoltaics and new energy vehicles. The photovoltaic equipment index has fallen by 68.4% from its 2022 peak [4]. - External demand uncertainty is increasing, with export prices for products like optical fibers and new energy vehicles declining significantly, reflecting the negative impact of external demand fluctuations on enterprises [4]. Group 3: Analysis of Causes for Imbalance - The supply-demand imbalance stems from a combination of external complexities and domestic economic transformation challenges, influenced by cyclical factors, structural contradictions, and trend changes [5]. - Post-pandemic recovery has been asymmetric, with industrial production recovering faster than consumer spending, leading to inventory buildup and increased supply pressure [6]. - Investment is increasingly directed towards innovation-driven industries, with significant capital inflow into high-tech manufacturing, while traditional manufacturing sectors see capital outflow [7]. - The shift towards high-quality development is reshaping supply-demand relationships, with a focus on efficiency and green low-carbon initiatives impacting traditional energy-intensive industries [8]. Group 4: Policy Recommendations - The government emphasizes addressing structural supply-demand contradictions to promote balance, suggesting the use of market signals to guide policy formulation [9]. - Establishing a multi-dimensional monitoring network that includes stock market indices, futures price trends, and ETF fund flows is recommended to enhance macroeconomic assessment [10]. - Implementing market-oriented capacity governance mechanisms and targeted policies to promote industrial upgrades is crucial for addressing overcapacity and guiding enterprises towards quality improvement [11]. - Demand management strategies should focus on using market information for counter-cyclical adjustments, supporting technology innovation and improving income distribution to enhance consumer capacity [13].