Investment Rating - The report raises the full-year 2025 GDP growth forecast to 4.8% from a previous estimate, indicating a positive outlook despite anticipated slower growth in the second half of the year [1][3]. Core Insights - The report highlights a stronger-than-expected real GDP growth of 5.2% year-on-year in the second quarter, driven by fiscal measures and local government bond issuance [2][3]. - However, a slowdown in growth is expected in the second half of 2025, with projections of 4.5% in the third quarter and 4.2% in the fourth quarter due to weaker exports, fading fiscal impulse, and ongoing deflation [3][11][12]. Summary by Sections Economic Growth - The report notes that the net impact of fiscal rollout has been more positive compared to export front-loading, with 85% of Rmb2 trillion in bonds issued in the first half of the year to alleviate local government liquidity stress [2][3]. - The anticipated slowdown in export growth is expected to drag GDP growth by 60-70 basis points in the second half, with a significant impact from earlier export front-loading [3][4]. Fiscal Policy - The fading fiscal impulse is highlighted, as the front-loaded nature of government bond issuance in the first half means less fiscal support in the second half, especially compared to a high base from the previous year [11][12]. - An additional fiscal package is expected in the fall, estimated at Rmb0.5-1 trillion, but this is considered relatively small given the current economic context [11][12]. Deflationary Pressures - The report emphasizes the persistence of deflation, with nominal GDP growth falling to 3.9% year-on-year in the second quarter, indicating weaker corporate earnings and potential impacts on household consumption [12][13]. - The GDP deflator is projected to remain subdued, with expectations of -0.9% year-on-year in the second half of 2025 and -0.7% in 2026, reflecting ongoing deflationary pressures [13].