Summary of the Fifteenth Five-Year Plan (15th FYP) Conference Call Industry Overview - The conference call discusses the **Fifteenth Five-Year Plan (15th FYP)** of China, focusing on economic rebalancing and technological self-reliance as key priorities. Key Points and Arguments 1. Economic Rebalancing - The **CPC's Suggestion** for the 15th FYP emphasizes a clearer intention for economic rebalancing, aiming to increase the consumption share in GDP [1][4][5] - The philosophy of consumption policy has shifted from a supply-centric approach to a more balanced supply-and-demand perspective [5][15] 2. Consumption Policy - The Suggestion explicitly targets a **significant increase in household consumption share** and aims to strengthen domestic demand as a leading driver of economic growth [8][18] - The plan includes discussions on welfare, social security, and common prosperity, addressing weak links in the current system [5][18] 3. Layered Industrial and Innovation Policies - The policy focus for traditional sectors will be on quality improvement, while emerging sectors like **new energy** will see efforts to strengthen and scale development [11][12] - The plan includes unconventional measures for key sectors and basic research, such as higher R&D expense deduction ratios and government procurement of innovative products [12][11] 4. Supply-and-Demand Balance in Consumption - The new consumption policy emphasizes both demand-side factors (employment, income, expectations) and supply-side support (expanding high-quality goods and services) [15][16] - Restrictions on auto and housing consumption are to be cleared to stimulate demand during economic downturns [15][16] 5. Welfare and Common Prosperity - The Suggestion aims to increase the household income share in national income and improve social security systems, including pensions and unemployment insurance [18][19] - Housing supply, particularly affordable housing, is highlighted as a key welfare issue [18][19] 6. Anti-Involution and Fiscal Policies - The term "involution" is addressed, focusing on the need for a **national unified market** and the regulation of local governments to prevent protectionism [21][22] - Fiscal policies will be proactive, with an emphasis on enhancing fiscal sustainability and regulating tax preferential policies [23][24] 7. Opening-Up and RMB Internationalization - The Suggestion reiterates the importance of institutional and services opening-up, with a supportive tone towards foreign direct investment (FDI) [23][24] - The plan aims to establish a **cross-border payment system for RMB**, indicating a more proactive approach to RMB internationalization compared to previous plans [24][23] Other Important Content - The conference call indicates that the full document of the 15th FYP will be approved by the NPC in early March 2026, with ongoing policy communications expected [4][5] - The market focus is anticipated to shift towards actual policy measures and their magnitudes in the coming weeks and months [4][5] This summary encapsulates the critical insights and strategic directions outlined in the conference call regarding China's 15th Five-Year Plan, highlighting the emphasis on economic rebalancing, consumption, innovation, and welfare improvements.

Summary of Key Points from the Conference Call Industry Overview - **Industry**: Stablecoins and their role in RMB internationalization - **Context**: The Stablecoin Ordinance in Hong Kong took effect on August 1, 2025, prompting discussions on the potential of stablecoins to enhance the global role of the RMB [1][8][10] Core Insights and Arguments - **Potential of Stablecoins**: - Stablecoins are viewed as a potential catalyst for RMB internationalization by increasing demand and creating alternatives to the SWIFT payment network [1][9] - However, a cautious stance is maintained due to challenges in user adoption, profitability for issuers, and compliance risks [1][10] - **User Adoption**: - The primary use case for stablecoins is in cross-border payments, offering lower costs and faster settlements compared to traditional methods [2][22] - Other applications, such as retail payments, base currency for crypto exchanges, and store of value, show limited growth potential due to high mobile payment penetration in China and lack of crypto trading [2][21][32] - **Profitability Challenges**: - Issuers rely on interest income from reserve assets, which is challenging in China due to low government bond yields (1-2%) compared to the US (around 4%) [3][45][50] - High fees for minting and burning stablecoins could deter adoption, creating a difficult balance for issuers [3][46] - **Compliance Issues**: - The regulatory environment in Hong Kong emphasizes compliance, requiring real-name verification and record-keeping for at least five years, which may hinder scalability [4][48] - The decentralized nature of stablecoins raises concerns about oversight and KYC/AML compliance [47][49] - **Fundamentals of RMB Internationalization**: - The global acceptance of RMB is more dependent on liquidity, stability, and investor confidence rather than the form it takes (stablecoin or digital currency) [5][54] - Bilateral agreements for cross-border settlements in local currencies are seen as a more effective strategy for advancing RMB internationalization [5][60] Additional Important Insights - **Market Dynamics**: - USD stablecoins dominate the global market, accounting for over 95% of the total market cap (~US$280 billion), with USDT and USDC leading [12][13] - The offshore CNH pool is limited, covering only 26% of China's total trade volume, which constrains the potential for RMB-stablecoins [24][28] - **Geopolitical Risks**: - The reliance on existing blockchains like Ethereum for RMB-stablecoins introduces geographical concentration risks, particularly with validators based in the US and Europe [49][52] - **Long-term Outlook**: - While RMB-stablecoins may facilitate smoother trade settlements and enhance digital commerce, their overall impact on RMB internationalization is expected to be limited in the near term [57][59] - **Current Trends**: - The share of cross-border goods trade payments settled in RMB has steadily increased, reaching 25% by the end of 2023, indicating a gradual shift towards RMB usage in international trade [5][63] This summary encapsulates the key points discussed in the conference call regarding the role of stablecoins in RMB internationalization, highlighting both opportunities and challenges within the current regulatory and market landscape.

Investment Rating - The report does not explicitly state an investment rating for the industry or specific securities Core Insights - The People's Bank of China (PBoC) has been lowering the fixings, reaching new year-to-date lows below 7.15, indicating a potential shift in currency management strategy [4][6] - There are expectations for significant dividend payouts from Chinese companies, estimated at approximately $23 billion in July, which may create near-term resistance for the USD/CNY exchange rate [4][16] - Anticipation of domestic policy stimulus and a potential summit between President Trump and President Xi is increasing, which could impact market sentiment and currency strength [4][20] Summary by Sections Currency Management - The PBoC's recent actions to lower fixings are seen as a response to the multi-month weakness of the dollar and narrowing tariff rate differentials, allowing for a stronger CNY [4][6] - The PBoC has also relaxed capital controls, increasing the overseas investment quota for Qualified Domestic Institutional Investors (QDII) for the first time since May 2024, which may enhance capital flows [9][12] Dividend Payouts - The report highlights that heavy dividend payouts in July could exert downward pressure on the CNY, with expectations of a peak in outflows around this time [4][16] - Major companies are scheduled to make significant dividend payouts, which could influence market dynamics and currency performance [19] Market Sentiment and Policy Expectations - There is speculation regarding potential housing market support from upcoming policy meetings, which could lead to a rally in property stocks and overall market sentiment [20][25] - The report notes that while speculation-driven rallies in China can be short-lived, current market conditions may allow for further equity gains, impacting the USD/CNY exchange rate [20][25]

Investment Rating - The report does not explicitly provide an investment rating for the industry Core Insights - Domestic consumption in China is showing signs of improvement, particularly driven by extended sales periods and trade-in programs during shopping festivals [5][10] - The ongoing tensions in the Middle East have led to fluctuations in oil prices, with expectations for Brent crude to stabilize around USD65 per barrel by Q4 2025 if de-escalation occurs [2][4] - The impact of oil price shocks is expected to have a mixed effect on different sectors, with a potential drag on real GDP growth and increases in CPI and PPI [4] Summary by Sections Oil Market - Approximately 18% of China's energy consumption is derived from crude oil, with about 70% of this being imported [3] - The Strait of Hormuz is crucial for China's oil imports, accounting for over 40% of its crude oil shipments [3] - A 10% increase in Brent crude oil prices could reduce real GDP growth by approximately 0.1 percentage points while increasing headline CPI and PPI by around 0.3 and 1.3 percentage points respectively over a year [4] Consumption Trends - The "618" shopping festival in 2025 saw a 15% year-on-year growth in gross merchandise value (GMV), a significant recovery from a 7% decline in 2024 [5] - Trade-in programs contributed approximately RMB380 billion in sales, representing 9% of monthly retail sales in May [5][10] - Service consumption is expected to grow, with events like the Jiangsu Urban Football League driving increased spending in culture and tourism [11] Fiscal Policy and Support - Fiscal spending has focused on improving livelihoods, with social security and education spending rising by 9.2% and 6.7% year-on-year respectively in the first five months of 2025 [13] - The government plans to allocate additional subsidies for trade-in programs, with a total of RMB138 billion earmarked for localities in the coming months [10] - The Lujiazui Forum highlighted China's commitment to financial reforms, including RMB internationalization and technological innovation [15] Real Estate and Land Sales - The property sector remains weak, with property investment down 12% year-on-year in May, affecting land sales revenue which decreased by 11.9% in the first five months [14][47] - New home sales in Tier-1 cities have also seen a year-on-year decline, indicating ongoing challenges in the real estate market [42][52] Economic Activity Indicators - Various economic indicators such as the operating rates in the steel and chemical sectors have shown stability, while coal consumption in major provinces has increased seasonally [16][25][26] - National box office revenues rose by 12%, reflecting a recovery in entertainment consumption [32]

Investment Rating - The report does not explicitly provide an investment rating for the industry or specific companies within it [5]. Core Insights - Stablecoins have gained significant traction, with a market cap exceeding USD 250 billion, primarily backed by USD, and are seen as a stable store of value and a tool for low-cost global transactions [2][3] - Recent regulatory developments in jurisdictions like Hong Kong and the US aim to establish frameworks for stablecoin issuance, focusing on licensing, reserve backing, and preventing interest payments to holders [3][4] - Hong Kong is positioning itself as a testing ground for stablecoins, particularly in the context of RMB internationalization, with initiatives to pilot RMB-backed stablecoins in offshore markets [4] Summary by Sections Stablecoin Market Dynamics - The stablecoin market has grown rapidly since the introduction of USDT in 2014, with over 95% of stablecoins being USD-backed, facilitating continuous and low-cost transactions [2] - The potential for stablecoins to disrupt cross-border payments is significant, with estimates suggesting costs could be reduced by 90% and transactions completed within 10 seconds [7] Regulatory Landscape - The Hong Kong Stablecoins Ordinance, effective August 1, 2025, mandates licensing for issuers and requires a 1:1 reserve backing with liquid assets [3] - The US Senate's GENIUS Act emphasizes similar principles, aiming to balance innovation with security in the stablecoin space [3] Implications for Traditional Finance - Stablecoins pose a potential threat to traditional financial systems, particularly in cross-border payments and deposit flows, although the immediate impact is limited given the current market size [7][8] - Major banks are proactively exploring stablecoin issuance to maintain competitiveness, with examples including Societe Generale and Standard Chartered planning to launch their own stablecoins [8]

Investment Rating - The report does not explicitly provide an investment rating for the industry or specific assets Core Insights - Uncertainty around US tariffs has intensified, with a recent court ruling against Trump's tariffs, suggesting potential risks of lower tariffs on China, but alternative authorities for tariff imposition remain [4][3] - Investor sentiment towards China remains negative despite a recent trade truce, with global investors showing interest primarily in sectors with clear earnings growth potential [9][12] - The People's Bank of China (PBoC) is promoting RMB internationalization as a strategy for de-dollarization, aiming to increase the RMB's share in goods trade to 40% [23][17] Summary by Sections Current Trade Recommendations - Long positions in 3-year CGB (FX-hedged) initiated on March 7, 2025, with a current yield of 1.49% and a profit of +4 basis points [2] Tariff and FX Market Dynamics - The FX market is experiencing a managed fix, with the CNY remaining stable against the dollar, tracking a narrow range of 7.18-19 [4][7] - The CNY has outperformed regional peers despite the broader dollar trend, indicating a degree of resilience in the currency [5][4] Investor Sentiment and Market Activity - Despite a normalization in export activities and a rebound in shipping prices post-trade truce, financial markets in China remain downbeat, with limited interest from local investors to repatriate dollars [9][17] - Local Chinese investors are hesitant to repatriate dollars due to weak economic fundamentals and low interest rates, with a notable shift from net buyers to net sellers of USD [17][25] RMB Internationalization Efforts - The share of CNY-denominated flows in goods trade has increased from 11% in 2018 to over 25% in 2024, driven by PBoC's policy push [23][27] - Commodity-related yuan settlement has risen significantly, indicating a growing trend towards using RMB in international trade [28][23]