20 August 2025 Relatedly, on 15 August, the Qiushi Journal, a flagship magazine of the Communist Party of China (CCP) Central Committee, published an article by President Xi, emphasising key measures needed to promote development of the private economy. The article was based on President Xi's speech delivered in the symposium with the private sector in February (see China macro tracker, 19 Feb), which reiterated the importance of fair competition, settling local government arrears as well as protecting POE' ...

Mexico’s central bank slowed the pace of monetary easing by reducing its benchmark interest rate by a quarter percentage point, instead of continuing with a recent string of half-point cuts. https://t.co/ioxzPqloQj ...

The Czech central bank held interest rates for a second meeting after some policymakers signaled an end to monetary easing due to concerns over soaring housing prices https://t.co/UxpOmUaZcl ...

Thailand’s consumer price index fell the most since early 2024 as energy costs remained subdued and utility tariffs dropped, providing the central bank more room to weigh monetary easing at its meeting next week https://t.co/v4EY9UcRp9 ...

Monetary Policy & Economic Growth - Bank Indonesia's policy rate cut is expected to stimulate the nation's economic growth [1] - Future monetary easing will be contingent on the stability of the Rupiah [1] Trade & International Relations - Indonesia announces a trade deal with the US [1]

Market Sentiment - A bullish stance on 99% of tokens is currently contrarian [1] - The market sentiment is expected to rapidly shift with monetary easing and the end of Quantitative Tightening (QT) [1]

Investment Rating - The report indicates a cautious outlook for the China local markets, with a revised USD/CNY target lowered to 7.15 for Q4 2025, expecting a gentle downtrend to 7.10 by Q2 2026 [2][8][36] Core Insights - Financial markets are entering the second half of 2025 with a pessimistic tone regarding China, as the market-implied risk premium for China-linked assets remains downbeat [2][3] - Despite recent signs of cooling trade tensions, investor sentiment has not turned positive, reflecting ongoing concerns about the protracted US-China trade war and domestic economic headwinds [3][8] - The report highlights that moderating tariff risks may allow USD/CNY to follow a broader downtrend, although CNY's relative weakness could persist [2][11] Summary by Sections Economic Outlook - The report notes that structural economic challenges in China, such as persistent deflation, weak consumer confidence, and ongoing adjustments in the property market, have not been resolved [3][8] - The recent US-China tariff détente in Geneva has led to expectations of lower tariffs, which may help stabilize the CNY [8][36] Currency and Rates - The CNY TWI is expected to decline further towards 94, with plans to re-engage in short CNH/crosses in the second half of 2025 [11][36] - The report recommends staying long on 3-year CGBs, anticipating further easing from the PBoC and hedging against potential trade tensions [2][36] Liquidity and Banking - Deposit rates in China have been cut further, which lowers banks' funding costs but raises concerns about potential deposit outflows as savers seek higher returns from alternative financial products [19][31] - The report indicates that lighter issuance pressure from government bonds, coupled with sluggish loan demand, provides a favorable backdrop for CNY rates [25][31]

Summary of Key Points from the Conference Call Industry or Company Involved - The discussion primarily revolves around the economic comparisons between **China** and **Japan**, particularly focusing on Japan's economic history and its implications for China's current economic situation. Core Insights and Arguments 1. **Economic Parallels**: China is facing challenges similar to those Japan encountered during its economic downturns in the 1980s and 1990s, including rising trade frictions, a deflating property bubble, and high debt levels [2][3][7]. 2. **Growth Potential**: Despite these challenges, China's growth potential remains significantly higher than Japan's, with opportunities for catch-up in per capita income and productivity [3][7]. 3. **Lessons from Japan**: Three key lessons from Japan's experience are highlighted for China to avoid stagnation: - **Fiscal Stimulus**: Japan's cautious fiscal response post-bubble was insufficient. China needs to implement more substantial fiscal measures to boost consumer confidence and combat deflation [30][33]. - **Monetary Easing**: Japan's slow monetary easing contributed to prolonged deflation. China must ensure that its monetary policy is sufficiently accommodative to stimulate growth [44][50]. - **Structural Reforms**: Japan's delayed action on bad debts hindered recovery. China must address its non-performing loans and implement structural reforms to enhance productivity and consumption [56][61][80]. Additional Important Content 1. **Trade Imbalances**: The report discusses the structural imbalances in global trade, emphasizing that China must reduce its investment and increase domestic consumption to alleviate trade tensions with the US [9][10]. 2. **Demographic Challenges**: Both countries face demographic issues, with an increasing proportion of elderly citizens, which could impact economic growth [20][24]. 3. **Consumer Confidence**: China's consumer confidence is currently weak, and the report suggests that without proactive measures, this could lead to entrenched deflation similar to Japan's experience [30][49]. 4. **Debt Management**: China is actively working on managing local government debt and has implemented measures to address bad debts, but more aggressive actions may be necessary [62][63]. 5. **Emerging Technologies**: The report notes that China has the potential to leverage advancements in technology, particularly in AI, to drive productivity gains and economic growth [79][80]. This summary encapsulates the critical insights and recommendations from the conference call, focusing on the economic dynamics between China and Japan and the lessons that can be applied to China's current economic strategy.