Investment Rating - The report does not explicitly provide an investment rating for the industry or specific companies covered Core Insights - The recent US-China trade agreement is viewed as a tactical pause rather than a comprehensive resolution, indicating ongoing tensions between the two nations [2][4] - The agreement addresses critical dependencies in technology and resources, with China relying on semiconductor imports and the US dependent on rare earth minerals [4] - Economic forecasts suggest US GDP growth of 1.0% in 2025 and 2026, while China's real GDP growth is expected to slow to 4.5% in 2025 [2][5] Summary by Sections US-China Trade Relations - The trade agreement is limited and does not resolve fundamental disagreements, with US tariffs on China imports remaining significantly higher than at the start of the year [4] - Both countries are attempting to reduce dependencies, but progress is slow, with China investing in its semiconductor industry and the US seeking alternative rare earth supplies [4] Economic Outlook - The report anticipates that tariffs will lead to a rise in goods prices, affecting inflation rates, with headline PCE expected to rise to 2.9% and core PCE to 3.3% in 2025 [2] - The US faces a weaker growth outlook due to higher tariffs, which may pressure the dollar and Treasury yields lower, while creating uncertainty about future inflation [6] Market Positioning - Investors are advised to position for slower growth and uncertainty in US-China relations, with potential opportunities in currency and Treasury markets [6] - The report suggests that the current economic environment may lead to a steeper yield curve as longer-maturity yields reflect inflation uncertainty [6]

Investment Rating - The report indicates a cautious outlook for the industry, with a projected GDP growth slowdown for China to 4.2% in 2025 due to tariff shocks [2][14]. Core Insights - The report highlights a significant deceleration in economic growth across Asia, particularly in China, driven by external tariff pressures and domestic economic challenges [14][29]. - Consumer confidence has notably weakened, attributed to uncertainties surrounding US tariffs, leading to a deteriorating outlook for household spending, especially in tier-1 cities [30][31]. - The report anticipates a phased tariff rollback, which may alleviate some trade pressures, but the overall trade-weighted tariff impact remains substantial [10][12]. Summary by Sections Economic Growth Projections - China's GDP growth is expected to soften meaningfully in Q2-Q3 of 2025, with a new forecast of 4.2% [2][14]. - The report presents a historical context of GDP growth rates, indicating a trend of declining growth [3]. Tariff Impact Analysis - The report details the current US tariffs on Chinese exports, with headline reciprocal tariffs remaining at 60% but trade-weighted tariffs potentially reducing to 34% with exemptions [9][10]. - It discusses the unsustainability of current tariffs and the likelihood of gradual rollbacks amid ongoing trade tensions [10][12]. Consumer Behavior and Confidence - A sharp drop in consumer confidence has been observed, likely due to tariff uncertainties, impacting household spending outlook [29][30]. - The report notes that consumer goods sales have been robust under government trade-in programs, but overall retail sales are under pressure [26][28]. Policy Stimulus Expectations - The report outlines expectations for policy stimulus, including a front-loading of existing policies and potential new stimulus measures in the second half of 2025 [34][36]. - It anticipates a significant fiscal package aimed at consumption and infrastructure investment, with a total of Rmb2 trillion expected in the NPC stimulus package [35][39]. Social Welfare and Economic Rebalancing - The report emphasizes the need for social welfare reforms to support household consumption and address the fragmented social safety net [41][43]. - It discusses the potential for increased social welfare spending to help unleash precautionary savings among households [43][44].