Core Viewpoint - The Chinese government is implementing a more proactive fiscal policy in 2025 to support major national strategic tasks and basic livelihood financing, ensuring a stable and orderly fiscal operation while achieving economic and social development goals [1] Fiscal Revenue and Expenditure - In 2025, the national general public budget revenue is projected to be 21,604.5 billion yuan, a decrease of 1.7% from the previous year, while tax revenue is expected to be 17,636.3 billion yuan, reflecting a growth of 0.8% [2] - The general public budget expenditure is anticipated to reach 28,739.5 billion yuan, an increase of 1% year-on-year, with significant growth in social security and employment (6.7%), education (3.2%), and health (5.7%) expenditures [3] Tax Revenue Performance - Key tax categories such as domestic value-added tax and corporate income tax have shown positive growth, indicating an increase in economic activity. For instance, the domestic value-added tax grew by 3.4%, and corporate income tax increased by 1% [2][3] - Specific industries like computer communication equipment manufacturing and scientific research services have seen substantial tax revenue growth, with increases of 13.5% and 14.3%, respectively [2] Consumption Support Measures - The government has introduced various funding policies to boost consumer spending, including a program for replacing old consumer goods, which has resulted in sales exceeding 2.6 trillion yuan and benefiting over 36 million people [5][6] - Initiatives to support new consumption formats and international consumption environments have been launched, with 65 pilot cities selected for funding to enhance consumer experiences [6] Childcare Subsidy Implementation - A new childcare subsidy program has been established, providing approximately 100 billion yuan in subsidies for children under three years old, marking a significant step in direct cash support for families [7] - The program aims for broad coverage and fairness, ensuring that all eligible children receive equal benefits, with over 30 million children already receiving subsidies [7][8]

Investment Rating - The report indicates a general improvement in sentiment towards Chinese equities, with some investors shifting from underweight to neutral or even overweight positions [2][3]. Core Insights - The Chinese equity market is perceived to be better positioned to withstand external shocks compared to other regions, although economic conditions remain soft but are on an improving trajectory [3]. - Investors are cautious about the sustainability of an export-led growth model due to rising global protectionism and are looking for structural reforms to enhance domestic consumption [3]. - The internet sector continues to be favored, with major Chinese internet companies seen as key players in the AI theme, alongside strong interest in auto sector leaders like BYD and Xiaomi [4]. Summary by Sections Marketing Feedback - Improved interest in Chinese equities noted during marketing efforts in Europe and Asia, with a shift in investor sentiment towards neutrality and some overweight positions [2]. - Global funds remain wary of emerging markets, preferring sustainable, consumption-led growth before committing significant investments [2]. Investor Sentiment - Most foreign investors agree that the Chinese equity market is relatively better positioned against external shocks, although valuations are less appealing compared to other emerging markets [3]. - Limited earnings per share (EPS) upside is expected due to deflationary pressures and competitive price wars in sectors like autos and food delivery [3]. Sector Preferences - The internet sector is the most favored, with large internet leaders viewed as prime beneficiaries of the AI trend [4]. - Interest in consumer stocks remains strong as investors seek to mitigate tariff impacts, while there is a notable reluctance to invest in banks and state-owned enterprises [4]. Key Debates - Discussions include the underperformance of A-shares compared to H-shares, the impact of rising IPOs in Hong Kong, unemployment issues, corporate profit growth amidst overcapacity, and monetization opportunities from AI [5]. - Confidence in domestic policy direction has improved, aiding stock selection despite previous concerns about the property market and local government debt [5].