Core Viewpoint - The CF40 macro policy quarterly report indicates that China's macro economy shows early signs of recovery in 2025, with monetary policy being crucial for stimulating endogenous growth in 2026 [1][2]. Economic Indicators - In 2025, key financial indicators such as the stock market, RMB exchange rate, social financing growth, and corporate deposits have shown significant improvement [1]. - Corporate profits have halted a multi-year decline, and overall consumption and labor market conditions remain stable [1]. Recovery Support - The recovery is primarily supported by fiscal policy, external demand, and prior price adjustments, but investment and the real estate market still face considerable pressure [1]. - The endogenous growth momentum remains weak, and the sustainability of the recovery needs to be strengthened [1]. Policy Recommendations for 2026 - The report emphasizes the need for increased counter-cyclical policy efforts, particularly through active fiscal measures and a focus on monetary policy [1][2]. - It is suggested that broad fiscal spending should be around 41 trillion yuan, with a public budget deficit aligned with 4% of GDP [2]. Monetary Policy Focus - The importance of monetary policy in expanding domestic demand is highlighted, with recommendations to lower the 7-day reverse repo rate, deposit rates, and LPR rates [2]. - A commitment to inflation targets and significant reductions in policy rates are seen as key actions to shift expectations for businesses and households [2][3]. Structural Issues and Market Dynamics - The long-standing "strong supply, weak demand" contradiction is noted as a source of instability in economic growth, with low consumption as a direct manifestation [3]. - To address this, it is proposed that the market should play a decisive role in resource allocation, alongside improving residents' income and social security [3].

Bloomberg Chinese stocks climbed to multi-year highs, fueled by sustained optimism over the country’s AI advances and emerging signs of an economic recovery. The benchmark CSI 300 Index advanced 1.6% to close at its highest level in four years, while the Shanghai Composite Index rose 1.5% to its strongest since July 2015. Materials and technology shares were among the day’s best performers. Buoyed by upbeat manufacturing activity, President Xi Jinping’s positive assessment of the economy and a continue ...

Core Viewpoint - The recent increase in cross-year funding prices has been observed, but the central bank's increased reverse repo operations have maintained a balanced liquidity environment. Concerns over government bond supply at the beginning of the year have led to bearish sentiment in the bond market, with a noticeable rise in the yield curve. The implementation of new regulations on fund sales fees is expected to alleviate redemption pressure on bond funds [1][15]. Market Overview - The yield changes for various maturities of government bonds from December 26, 2025, to January 4, 2026, include increases of 4.5 basis points (BP) for the 1-year bond, 1.44 BP for the 2-year bond, and 2.99 BP for the 5-year bond, among others [2][3]. - The bond market experienced a significant decline, particularly in long-term and ultra-long-term bonds, with the 30-year bond futures dropping 1.28%, marking the lowest level since October 2024 [5]. Regulatory Changes - The new regulations on the management of sales fees for publicly offered securities investment funds have been officially implemented, allowing for a longer redemption buffer period of 12 months and easing the redemption fee rates compared to previous drafts. This is expected to reduce the redemption pressure on bond funds [1][15][16]. Primary Market Activity - In the previous week, a total of 9 bonds were issued, amounting to 26 billion yuan, all of which were local government bonds from Beijing. For the upcoming week, 27 bonds are planned for issuance, totaling approximately 157.66 billion yuan, including 4 billion yuan in government bonds and 117.66 billion yuan in local government bonds [7]. International Market Insights - The U.S. long-term treasury yields have risen, with the 10-year treasury yield increasing by 6.3 BP to 4.19%, and the 30-year yield reaching a new high of 4.87%. This increase is attributed to better-than-expected employment data and ongoing expansion in the manufacturing sector, which has reduced demand for safe-haven assets [8][9]. Institutional Perspectives - Analysts from various institutions have noted that the new regulations on redemption fees for bond funds are a significant positive development, potentially stabilizing the bond market sentiment. However, concerns regarding the supply-demand imbalance for ultra-long bonds remain, and investors are advised to be cautious of re-pricing risks in the yield curve [15][16].

Germany’s economy will gradually recover next year and gain momentum in 2027, helped by higher public outlays on defense and infrastructure, the Bundesbank said https://t.co/LdKeW3wu5h ...

It looked like Britain's economy was down in the dumps, but there are tentative signs that things could be about the change for the better. Get the Readout with @hariboconomics https://t.co/5LtGVf9kZd ...

The New Zealand government will head into an election year facing deeper budget deficits and a delayed return to surplus as an economic recovery takes longer to gather momentum https://t.co/ja24Sbnqly ...

Economic Indicators - Japan's economy contracted at a 2.3% annual pace in the July-September quarter, marking the first decline in six quarters [3] - The Bank of Japan's quarterly "tankan" survey showed a slight improvement in sentiment among big manufacturers, with optimism rising to 15 from 14, the highest level in four years [1][3] Investment Trends - Investment in fixed assets in China fell by 2.6% in November year-on-year, indicating a drop of 11.1% year-on-year in the first 11 months of the year [5] - Retail sales in China rose by 4% from January to November, while factory output increased by 4.8% [5] Market Reactions - Tokyo's Nikkei 225 index fell by 1.3% to 50,168.11, while the Hang Seng index in Hong Kong declined by 1.4% to 25,625.60 [1][7] - Bitcoin's price dropped below $88,000 early Monday from about $92,000, recovering to just over $90,000 later in the day, as higher interest rates are expected to draw investment back into Japan [4]

A key survey of Norway’s business sentiment showed the Nordic nation may face a slower economic recovery, strengthening the case for its central bank to shorten its planned break from monetary easing https://t.co/umveQMai0u ...

New Zealand residential building rebounded in the third quarter, adding to signs the economy is recovering in response to central bank stimulus https://t.co/7RQkhW0eNB ...

Market Trends - HSBC Asset Management predicts China's government bond yields are likely to fall back toward a record low next year [1] Monetary Policy - An uneven economic recovery puts pressure on the central bank to cut interest rates [1]