Core Viewpoint - The implementation of the EU Carbon Border Adjustment Mechanism (CBAM) starting January 1 will significantly impact China's high-carbon industries, particularly steel and aluminum exports to the EU, which account for approximately 3.5% of China's total exports to the EU [2][3]. Group 1: Short-term Impact - The short-term pressure from CBAM is manageable, with the initial carbon cost set at a base rate of 2.5%, allowing companies some time to adapt [3]. - Companies that have not undertaken energy-saving and carbon-reduction transformations will face the most significant challenges, especially those relying on default values for carbon emissions reporting [2][3]. - The default emission values set by the EU are particularly high for Chinese products, creating a barrier for exports [2][3]. Group 2: Carbon Management and Compliance - Exporting companies must shift from relying on default values to establishing their own carbon data monitoring and reporting systems to avoid increased carbon costs [5]. - Over 90% of Chinese companies used global average default values during the trial phase, which will lead to higher costs once country-specific default values are published [5]. - Companies are encouraged to engage with third-party certification bodies to enhance the credibility and compliance of their carbon data [5]. Group 3: Long-term Strategy - In the long term, companies need to focus on low-carbon transformation as a key strategic direction for sustainable development [8]. - The expansion of CBAM to include 180 downstream products by 2028 will increase the complexity of carbon footprint calculations, necessitating a comprehensive approach to carbon management across the supply chain [8]. - Companies should evaluate potential partners based on their carbon data transparency and low-carbon transition plans to ensure compliance and competitiveness [8]. Group 4: External Environment and Policy Recommendations - There is a call for the improvement of the domestic carbon market and the introduction of quota auction mechanisms to create a more competitive environment for companies [9]. - Diplomatic efforts are suggested to negotiate with the EU for recognition of China's carbon pricing, which could alleviate some of the carbon cost burdens on Chinese exporters [9]. - The Chinese government aims to maintain fair trade practices and protect the interests of its enterprises while addressing global climate change challenges [9].

Core Viewpoint - The manufacturing and non-manufacturing sectors in China showed signs of recovery in December 2025, with key indices rising above the expansion threshold, indicating improved economic conditions [1][4]. Manufacturing Sector - In December 2025, the Manufacturing Purchasing Managers' Index (PMI) reached 50.1%, marking the first time it entered the expansion zone since April [1]. - Among the 21 surveyed industries, 16 reported an increase in PMI compared to the previous month, indicating improved production and operational conditions [1]. - The production index and new orders index were 51.7% and 50.8%, respectively, both showing significant increases of 1.7 and 1.6 percentage points from the previous month [1]. - High-tech manufacturing PMI was 52.5%, up 2.4 percentage points, indicating positive growth trends [3]. - Equipment manufacturing and consumer goods industries both recorded PMIs of 50.4%, rising by 0.6 and 1.0 percentage points, respectively [3]. - The procurement activity accelerated with a procurement volume index of 51.1%, entering the expansion zone [2]. Non-Manufacturing Sector - The Non-Manufacturing Business Activity Index was 50.2%, an increase of 0.7 percentage points, indicating an improvement in the non-manufacturing sector's economic conditions [4]. - The new orders index for non-manufacturing rose to 47.3%, up 1.6 percentage points, reaching the highest level this year [4]. - The business activity expectation index for non-manufacturing was 56.5%, reflecting a continuous increase for three months, indicating rising market confidence [4]. - The construction industry saw a significant improvement, with the business activity index at 52.8%, up 3.2 percentage points from the previous month [4]. Composite Index - The Composite PMI Output Index reached 50.7%, an increase of 1.0 percentage point, indicating overall expansion in production and operational activities [5].

Core Viewpoint - The manufacturing PMI has returned to the expansion zone, indicating a recovery in both production and demand in the manufacturing sector, driven by steady growth policies and resilient exports [2][3]. Manufacturing PMI Overview - In December, the manufacturing PMI was reported at 50.1%, an increase of 0.9 percentage points from the previous month, marking the first return to the expansion zone since April [2]. - The non-manufacturing business activity index also improved to 50.2%, up by 0.7 percentage points from the previous month, reflecting a simultaneous improvement in non-manufacturing activity [2]. Factors Driving Recovery - The recovery in the manufacturing PMI is attributed to the ongoing implementation of growth-stabilizing policies and resilient export performance [2]. - The "two 500 billion" growth-stabilizing policies introduced in late September and early October have begun to show effects, with 500 billion yuan in new policy financial tools fully deployed by October, boosting infrastructure and manufacturing investments [2][4]. Production and Demand Indices - The production index and new orders index for December were reported at 51.7% and 50.8%, respectively, both showing significant increases of 1.7 and 1.6 percentage points from the previous month [2][3]. - The new orders index has risen above the critical point for the first time since the second half of the year, indicating expansion in both production and demand [3]. Enterprise Size Analysis - Large enterprises saw a PMI of 50.8%, up by 1.5 percentage points, returning to the expansion zone, while medium-sized enterprises had a PMI of 49.8%, up by 0.9 percentage points, indicating a slight recovery [4]. - Small enterprises, however, experienced a decline in PMI to 48.6%, down by 0.5 percentage points, reflecting greater pressure due to weak consumer demand [4][5]. Future Outlook - The production and business activity expectation index rose to 55.5%, an increase of 2.4 percentage points, indicating growing confidence among manufacturing enterprises regarding market development [5]. - The support from growth-stabilizing policies is expected to continue to bolster manufacturing sentiment, with projections suggesting that the manufacturing PMI may remain in the expansion zone into January 2026 [5].

Economic Overview - The overall economic sentiment in China is improving, with the composite PMI output index at 50.7%, up 1 percentage point from the previous month[3] - Manufacturing PMI returned to the expansion zone for the first time in 8 months, with indices for production and new orders rising by 1.7 and 1.6 percentage points, respectively[3] Sector Performance - Manufacturing PMI for December shows significant growth, with 16 out of 21 surveyed industries reporting an increase[3] - High-tech manufacturing saw the most notable improvement, with a PMI of 52.5%, up 2.4 percentage points from the previous month[3] Construction and Services - The construction sector's PMI rose significantly, with a business activity index at 52.8%, indicating a recovery driven by favorable weather and pre-holiday construction activities[3] - Service sector sentiment showed a slight recovery, but retail and catering industries remain under pressure, with business activity indices in contraction zones[3] Price Indices - The purchasing price index for raw materials fell slightly by 0.5 percentage points, while the factory price index increased by 0.7 percentage points, indicating a narrowing gap between supply and demand[3] - The PPI year-on-year decline is expected to narrow to between -2.1% and -2% as the PMI remains above negative territory for five consecutive months[3] Risks and Recommendations - Risks include potential underperformance of growth stabilization policies, unexpected severity of overseas economic downturns, and escalation of geopolitical conflicts[2][13] - Investment recommendations suggest a strong buy for stocks expected to outperform the market by over 20% in the next six months[14]

Report Overview - The report is a fixed - income review report focusing on the PMI data in December 2025 [1] Industry Investment Rating - No industry investment rating is provided in the report Core Viewpoints - In December, the manufacturing PMI reached 50.1, rising by 0.9 and returning to the expansion range for the first time since April; the non - manufacturing PMI was 50.2, up 0.7 month - on - month. The PMI data shows that under the influence of pre - holiday effects, domestic demand expansion policies, and price transmission due to anti - involution deepening, enterprises' operating pressure, production expectations, demand side, and production expansion willingness have all improved. It is necessary to continuously monitor the sustainability of domestic demand improvement and policy strength [2][4] Section Summaries Manufacturing - **Business Conditions**: The production index increased significantly by 1.7 to 51.7, and the new order index rose by 1.6 to 50.8, with the new export order index up 1.4 to 49. Enterprises' production and operation enthusiasm increased notably, with the raw material inventory rising 0.5 to 47.8, the procurement volume up 0.6 to 51.1, and the production and operation activity expectation up 2.4 to 55.5. From an industry perspective, industries such as农副 food processing, textile and clothing, and computer communication and electronic equipment had both production and demand above 53, while industries like non - metallic mineral products and ferrous metal smelting and rolling processing had both indexes below the critical point [3] - **Profitability**: The purchase price of raw materials decreased by 0.5, and the ex - factory price index increased by 0.7, indicating marginal improvement in corporate profits [3] - **Enterprise Size**: The business conditions of large enterprises rebounded above the boom - bust line. In December, the PMIs of large, medium, and small enterprises changed by 1.5, 0.9, and - 0.5 respectively, reaching 50.8, 49.8, and 48.6 [3] - **Key Industries**: The PMIs of high - tech manufacturing, equipment manufacturing, consumer goods industries, and raw material industries changed by 2.4, 0.6, 1.0, and 0.5 respectively, reaching 52.5, 50.4, 50.4, and 48.9 [3] Non - manufacturing - **Construction Industry**: In December, the business activity index of the construction industry was 52.8, up 3.2 month - on - month, and returned above the boom - bust line, showing strong resilience [3] - **Service Industry**: The business activity index of the service industry was 49.7, up 0.2, indicating some pressure [3] Investment Suggestions - The December PMI data shows comprehensive improvement in enterprises' operating pressure, production expectations, demand side, and production expansion willingness. It is recommended to continuously monitor the sustainability of domestic demand improvement and policy strength [4]

Core Viewpoint - The overall economic sentiment in China is improving, as indicated by the rise in manufacturing and non-manufacturing Purchasing Managers' Indices (PMI) in December, signaling a recovery in market demand and a more proactive economic policy [1][2]. Manufacturing PMI Analysis - The manufacturing PMI for December stands at 50.1%, marking a 0.9 percentage point increase from the previous month, breaking an eight-month streak below 50% and entering the expansion zone [3]. - Among the 13 sub-indices, production, new orders, new export orders, backlogs, finished goods inventory, purchasing volume, ex-factory prices, raw material inventory, supplier delivery times, and production expectations all showed increases ranging from 0.1 to 2.4 percentage points [3]. - The new orders index has risen above the critical point for the first time since the second half of the year, with specific industries like food processing, textiles, and electronics showing production and new orders indices above 53.0% [3]. Industry-Specific Insights - In the 21 manufacturing sectors surveyed, 16 sectors reported a rise in PMI compared to the previous month, indicating improved operational conditions [5]. - High-tech manufacturing PMI reached 52.5%, up 2.4 percentage points, while equipment manufacturing and consumer goods sectors both recorded PMIs of 50.4%, indicating expansion [5]. - However, industries such as non-metallic mineral products and black metal smelting remain under pressure, with their indices below the critical point [4]. Financial Sector Performance - The financial sector's business activity index and new orders index both rose for two consecutive months, exceeding 60%, indicating enhanced financial support for the real economy [6]. - The construction sector's business activity index increased to 52.8%, up 3.2 percentage points, ending a four-month period below 50% and signaling a rebound in construction activities [6][7]. Business Expectations - The manufacturing production and business activity expectation index rose to 55.5%, the highest since April 2024, while the service sector's expectation index reached 56.4% [8]. - The positive outlook is supported by clear policy signals and a stable trade environment, suggesting a solid foundation for the upcoming year [8]. Future Economic Outlook - The economic policies outlined in the 14th Five-Year Plan are expected to provide strategic direction for the next five years, with the recent Central Economic Work Conference setting clear goals for 2026 [9]. - The manufacturing sector is anticipated to achieve steady growth in both quality and quantity in 2026, driven by multiple positive factors [9].

Core Viewpoint - The overall economic sentiment in China is improving, as indicated by the rise in manufacturing PMI, non-manufacturing business activity index, and comprehensive PMI output index, all entering the expansion zone in December [1][3]. Manufacturing PMI - In December, the manufacturing PMI reached 50.1%, an increase of 0.9 percentage points from the previous month, marking its first rise above 50% after eight consecutive months [3]. - Among the 13 sub-indices, production index, new orders index, new export orders index, backlog orders index, finished goods inventory index, purchasing volume index, ex-factory price index, raw materials inventory index, supplier delivery time index, and production and business activity expectation index all showed increases ranging from 0.1 to 2.4 percentage points [3]. - The new orders index rose above the critical point for the first time since the second half of the year, indicating a positive trend in market expectations [3]. Key Industries - High-tech manufacturing PMI was 52.5%, up 2.4 percentage points, indicating a favorable growth trend [4]. - Equipment manufacturing and consumer goods industries both recorded PMIs of 50.4%, rising by 0.6 and 1.0 percentage points respectively, also entering the expansion zone [4]. - High-energy-consuming industries had a PMI of 48.9%, up 0.5 percentage points, continuing to show recovery [4]. Financial Sector Activity - The financial sector's business activity index and new orders index both rose for two consecutive months, exceeding 60%, indicating enhanced financial support for the real economy [6]. - The construction industry business activity index increased to 52.8%, up 3.2 percentage points, ending a four-month period below 50% [6]. Business Expectations - The manufacturing production and business activity expectation index reached 55.5%, up 2.4 percentage points, the highest since April 2024 [8]. - The service industry business activity expectation index rose to 56.4%, up 0.5 percentage points, while construction firms maintained optimistic market expectations with their index above 57% for two consecutive months [8]. Economic Outlook - The manufacturing PMI is expected to average 49.6% in 2025, remaining stable compared to 2024, with December's rise indicating a positive end to the year and a solid foundation for the new year [9]. - The "14th Five-Year Plan" provides strategic direction for economic and social development, with recent policy signals and the Central Economic Work Conference outlining clear deployments for 2026, which are expected to inject momentum into macroeconomic development [9].

Group 1 - The manufacturing Purchasing Managers' Index (PMI) rose to 50.1% in December, marking the first time it has entered the expansion zone since April, indicating an overall recovery in economic sentiment [2][4] - Among the 21 surveyed industries, 16 reported an increase in PMI compared to the previous month, suggesting improved production and operational conditions [2] - The production index and new orders index were 51.7% and 50.8%, respectively, both showing significant increases, particularly the new orders index, which rose above the critical point for the first time since the second half of the year [2][3] Group 2 - The PMI for large enterprises returned to the expansion zone at 50.8%, while medium-sized enterprises' PMI was at 49.8%, and small enterprises' PMI decreased to 48.6%, indicating varied recovery levels across different enterprise sizes [2][3] - High-tech manufacturing PMI reached 52.5%, showing a positive growth trend, while the high-energy-consuming industries remained below the critical point at 48.9% [3] - The production and business activity expectation index rose to 55.5%, reflecting increased confidence among manufacturing enterprises regarding market development [3] Group 3 - The non-manufacturing business activity index increased to 50.2%, indicating an improvement in the non-manufacturing sector's economic conditions [5] - The service sector's business activity index was at 49.7%, with certain industries like telecommunications and financial services showing strong growth, while retail and catering remained in contraction [6] - The construction sector's business activity index rose significantly to 52.8%, driven by favorable weather conditions and year-end project acceleration [6] Group 4 - The comprehensive PMI output index reached 50.7%, indicating overall expansion in production and business activities across sectors [7] - The manufacturing production index and non-manufacturing business activity index were 51.7% and 50.2%, respectively, contributing to the comprehensive PMI's rise [7]

Core Insights - In December, China's manufacturing Purchasing Managers' Index (PMI) rose by 0.9 percentage points to 50.1%, marking a return to the expansion zone after eight months [1][21] - The non-manufacturing business activity index also increased to 50.2%, up by 0.7 percentage points, indicating a recovery in the non-manufacturing sector [1][21] - The comprehensive PMI output index reached 50.7%, reflecting overall expansion in production and business activities compared to the previous month [1][21] Manufacturing PMI Summary - The manufacturing PMI stood at 50.1%, with 16 out of 21 surveyed industries showing improvement [21][22] - The production index rose to 51.7%, up by 1.7 percentage points, indicating accelerated production activities [5][22] - The new orders index increased to 50.8%, up by 1.6 percentage points, suggesting improved market demand [5][22] - Large enterprises reported a PMI of 50.8%, up by 1.5 percentage points, while medium and small enterprises reported PMIs of 49.8% and 48.6%, respectively [5][22] Non-Manufacturing PMI Summary - The non-manufacturing business activity index was 50.2%, indicating a return to expansion [1][21] - The construction sector's business activity index rose to 52.8%, up by 3.2 percentage points, reflecting significant improvement [10][24] - The service sector's business activity index was 49.7%, showing a slight increase of 0.2 percentage points, but still below the expansion threshold [10][24] - The new orders index for non-manufacturing rose to 47.3%, indicating a recovery in market demand [14][24] Comprehensive PMI Output Summary - The comprehensive PMI output index reached 50.7%, up by 1.0 percentage points, indicating overall expansion in business activities [1][21][24] - The manufacturing production index and non-manufacturing business activity index contributed to this growth, standing at 51.7% and 50.2%, respectively [24]

Core Viewpoint - The Purchasing Managers' Index (PMI) for December 2025 indicates a recovery in China's economic activity, with both manufacturing and non-manufacturing sectors showing expansion, as all three key indices rose above the critical 50% mark [2][5]. Manufacturing PMI Summary - The manufacturing PMI reached 50.1%, marking its first rise above the expansion threshold since April, with 16 out of 21 surveyed industries reporting improved conditions [2][7]. - Production index and new orders index increased to 51.7% and 50.8%, respectively, indicating significant expansion in both production and demand, with new orders surpassing the critical point for the first time since the second half of the year [3][10]. - Large enterprises reported a PMI of 50.8%, while medium and small enterprises showed PMIs of 49.8% and 48.6%, respectively, indicating a mixed recovery across different enterprise sizes [4][9]. Non-Manufacturing PMI Summary - The non-manufacturing business activity index rose to 50.2%, reflecting an improvement in the non-manufacturing sector's economic conditions [5][12]. - The service sector's business activity index was at 49.7%, with certain industries like telecommunications and financial services showing strong growth, while retail and catering remained in contraction [6][14]. - The construction sector saw a notable increase in its business activity index to 52.8%, driven by favorable weather conditions and pre-holiday construction activities [6][14]. Comprehensive PMI Output Index Summary - The comprehensive PMI output index reached 50.7%, indicating overall expansion in production and business activities compared to the previous month [5][12]. - The manufacturing production index and non-manufacturing business activity index were reported at 51.7% and 50.2%, respectively, contributing to the overall positive trend [5][12].