1. Report Industry Investment Rating No relevant content provided. 2. Core Viewpoints of the Report - In September 2025, the manufacturing PMI increased by 0.4 pct month - on - month to 49.8%, slightly exceeding expectations but still below the boom - bust line, while the non - manufacturing PMI dropped by 0.3 pct to 50.0%. The supply - demand relationship needs optimization, and whether production is "front - loaded" remains to be seen. External demand is stable, domestic demand recovers slowly, and the gap between the "purchase price of major raw materials - ex - factory price" continues to widen, putting pressure on enterprise profit restoration. Small - scale enterprise sentiment has significantly improved, and the sentiment of emerging manufacturing industries has also improved. Service industry sentiment has declined, and the construction industry has improved but is still at a relatively low level. The sustainability of PMI restoration needs to be observed. The bond market priced the fundamentals further on the day the data was released, and it is expected that as the pricing power of fundamentals on the bond market gradually increases, the bond market performance in the fourth quarter may be better than that in the third quarter [2][7]. 3. Summary by Related Catalogs 3.1 Event Description - In September 2025, the manufacturing PMI was slightly better than expected but below the boom - bust line, rising 0.4 pct month - on - month to 49.8% (Bloomberg consensus forecast: 49.6%), basically in line with seasonality. The non - manufacturing PMI dropped 0.3 pct to 50.0% (Bloomberg consensus forecast: 50.2%), remaining at a seasonal low. Among them, the service industry PMI dropped 0.4 pct to 50.1%, and the construction industry PMI rose slightly by 0.2 pct to 49.3%, both weaker than seasonality [5]. 3.2 Event Comment - **Manufacturing Industry** - Manufacturing sentiment has moderately recovered, but the supply - demand relationship needs optimization, and whether production is "front - loaded" remains to be seen. In September, the manufacturing PMI improved more than expected, rising 0.4 pct to 49.8%. The production index rose 1.1 pct to 51.9%, reaching a new high since Q2 this year, while the new order index only increased 0.2 pct to 49.7%. The gap between the "production - new order" index widened to 2.2 pct, indicating that the supply recovery intensity may be greater than the demand improvement. Enterprises' willingness to replenish inventory has increased, but there are signs of inventory accumulation, and production may be "front - loaded" [7]. - There are differentiations in external and internal demand and price structure. External demand is stable, domestic demand recovers slowly, and the price indicators have generally improved, but the gap between the "purchase price of major raw materials - ex - factory price" continues to widen, which may still restrict enterprise profit restoration. In September, the purchase price index of major raw materials remained in the expansion range of 53.2%, while the ex - factory price index dropped to 48.2%, and the gap between the two widened to 5.0 pct. External demand remained resilient, with the new export order index rising to 47.8%, while domestic demand recovery was still relatively slow, with the new order index only increasing 0.2 pct to 49.7% [7]. - Small - scale enterprise sentiment has significantly improved, and the sentiment of emerging manufacturing industries has also improved. In September, the PMI of large - scale enterprises reached 51.0%, remaining in the expansion range. Small - scale enterprises improved significantly, with the PMI rising 1.6 pct month - on - month, while the sentiment of medium - scale enterprises declined. In terms of industries, the PMI of the equipment manufacturing and high - tech manufacturing industries remained in the high - sentiment range above 51%, with significant improvements in industries such as automobiles and railway, ship, and aerospace equipment. The PMI of the consumer goods industry also rose to 50.6% [7]. - **Non - manufacturing Industry** - Service industry sentiment has declined, and the construction industry has improved but is still at a seasonal low. In September, the non - manufacturing business activity index dropped 0.3 pct to 50.0%, and the service industry index dropped 0.4 pct to 50.1%. The end of the summer vacation effect is an important factor, with the sentiment of consumer - related industries such as catering and cultural and entertainment significantly declining, while modern service industries such as finance and telecommunications maintained high sentiment. The business activity index of the construction industry rose slightly by 0.2 pct, but the absolute level of 49.3% was still below the boom - bust line, indicating that real estate and infrastructure investment may continue to be under pressure [7]. - **Bond Market Outlook** - The sustainability of PMI restoration needs to be observed. On the day the data was released, the bond market priced the fundamentals further, with the yield of the 10 - year active treasury bond dropping 2 BP. A series of growth - stabilizing policies have been implemented recently, and the investment of 500 billion yuan in new policy - based financial instruments may support infrastructure investment. The expectation of optimizing real estate market regulation policies in many places has increased, but whether the economy will continue to improve in an environment of weak domestic demand and prices remains to be seen. It is expected that as the pricing power of fundamentals on the bond market gradually increases, the bond market performance in the fourth quarter may be better than that in the third quarter [7].

Core Insights - The total R&D expenditure in China for 2024 is projected to exceed 3.6 trillion yuan, marking an 8.9% increase from the previous year, indicating a stable growth trend in R&D investment [2] - China ranks second globally in R&D expenditure, following the United States, and has a higher growth rate than major economies [2] - The R&D expenditure intensity (R&D expenditure as a percentage of GDP) is 2.69%, up by 0.11 percentage points from the previous year, reflecting a faster increase than the average since the 14th Five-Year Plan [2] R&D Expenditure Breakdown - In 2024, R&D expenditures from enterprises, government research institutions, and higher education institutions are 28,211.6 billion yuan, 4,231.6 billion yuan, and 3,065.5 billion yuan respectively, with growth rates of 8.8%, 9.7%, and 11.3% [3] - Enterprises contribute over 75% of total R&D funding, with a contribution rate of 77.1% to the overall growth of R&D expenditure [3] - High-tech manufacturing and equipment manufacturing sectors show R&D expenditure growth rates of 10.2% and 10.5%, respectively, outpacing the overall growth rate [3] Basic Research Investment - Basic research funding reached 250.09 billion yuan, with a growth rate of 10.7%, while applied research and experimental development funding grew by 17.6% and 7.6% respectively [4] - The proportion of basic research funding in total R&D expenditure is 6.88%, the highest in history, with government research institutions and universities contributing significantly to this growth [4] Fiscal Support and Tax Incentives - National fiscal science and technology expenditure for 2024 is 12,629.2 billion yuan, a 5.3% increase from the previous year, focusing on basic research and scientific research facilities [5] - Tax incentives for R&D have led to a 16.7% increase in the number of enterprises benefiting from R&D expense deductions and a 25.5% increase in the amount of expenses claimed compared to 2021 [5] Regional Development and Innovation - R&D expenditures in eastern, central, western, and northeastern regions of China are 23,773.0 billion yuan, 6,582.1 billion yuan, 4,759.8 billion yuan, and 1,211.9 billion yuan respectively, all showing significant growth [7] - Key regions like Beijing, Shanghai, and Guangdong have R&D expenditures exceeding 5,000 billion yuan, highlighting their role as innovation hubs [7] - The Yangtze River Economic Belt and Yellow River Basin regions also show robust R&D expenditure growth, indicating effective regional collaboration in innovation [7]

Core Insights - The September Purchasing Managers' Index (PMI) for China indicates a slight improvement in economic output, with the manufacturing PMI at 49.8%, up 0.4 percentage points from the previous month, while the non-manufacturing business activity index decreased to 50.0%, down 0.3 percentage points [1][2] Manufacturing Sector - The manufacturing PMI has shown a continuous recovery, with a production index of 51.9%, up 1.1 percentage points, reaching a six-month high, and a new orders index of 49.7%, up 0.2 percentage points [2] - Factors contributing to the recovery include seasonal improvements, the implementation of consumer loan subsidies, and a more active domestic capital market, which has boosted market confidence [2][3] - The prices of major raw materials have decreased, with purchasing prices down 0.1 percentage points to 53.2% and factory prices down 0.9 percentage points to 48.2% [3] - Key manufacturing sectors such as equipment manufacturing, high-tech manufacturing, and consumer goods are expanding, with PMIs of 51.9%, 51.6%, and 50.6% respectively, all above the manufacturing average [3] Non-Manufacturing Sector - The non-manufacturing business activity index fell to 50.0%, with the service sector index at 50.1%, both indicating a decline [4][5] - The drop in service sector activity is attributed to the seasonal effects post-summer and the timing of the Mid-Autumn Festival, which has delayed consumer activities [4][5] - Despite the overall decline, sectors such as postal, telecommunications, and financial services remain in a high-growth zone with indices above 60.0% [5] Construction Sector - The construction business activity index is at 49.3%, showing a slight increase of 0.2 percentage points, but still below the expansion threshold [6] - The construction activity is weak, particularly in civil engineering and housing, indicating a need for improved project coordination and funding [6] - Recent data shows a 9.0% month-on-month increase in housing transactions in 30 major cities, and a 14.4% increase in land transactions, reflecting typical seasonal patterns [6]

Core Viewpoint - The September economic data indicates a seasonal improvement, aligning with other soft indicators like EPMI and BCI, suggesting a positive trend in the economy during the autumn peak season [4][5]. Group 1: Economic Indicators - The September EPMI rose by 4.6 points to 52.4, reflecting seasonal characteristics of the autumn peak, with the increase aligning with seasonal averages [5]. - The BCI index rebounded from 46.9 to 51.1 in September, exceeding expectations after a slowdown in the previous months [5]. - The PMI for September was reported at 49.8, slightly above the previous value of 49.4, indicating a stabilization in economic activity [5]. Group 2: Production and Demand - Production outpaced demand, with the production index at 51.9 and new orders at 49.7, resulting in a production-new orders differential of 2.2 points, the highest since January 2024 [8]. - The export index remained stable, with new export orders at 47.8, indicating resilience in external demand despite global economic challenges [8]. Group 3: Business Size Impact - Large enterprises showed higher PMI at 51.0, while small enterprises improved significantly by 1.6 points, contrasting with a decline in medium-sized enterprises [9]. - The disparity suggests that large firms benefit from more substantial projects, while small firms gain from exports and emerging sectors [9]. Group 4: Price Trends - Price indices showed fluctuations, with the purchasing price index at 53.2 and the factory price index at 48.2, indicating ongoing price pressures despite some initial improvements [10]. - The short-term price trends need reinforcement, as production levels exceed demand, affecting pricing stability [10]. Group 5: Business Expectations - The production and business activity expectation index rose to 54.1, reflecting improved business sentiment due to factors like debt clearance and market activity [10]. - The equipment manufacturing sector showed the highest PMI at 51.9, while consumer goods manufacturing also improved, driven by seasonal factors [10]. Group 6: Construction Sector - The construction sector's PMI was at 49.3, indicating a low level of activity historically for September, with investment in real estate and infrastructure showing signs of weakness [11]. - The need for policy measures to stimulate investment in construction is highlighted to prevent further economic slowdown [13].

Core Insights - The profits of industrial enterprises above designated size increased by 0.9% year-on-year in the first eight months, reversing the continuous decline in profits since May of this year [1] - The manufacturing sector saw a profit growth of 7.4%, accelerating by 2.6 percentage points compared to the first seven months [1] - The electricity, heat, gas, and water production and supply industry experienced a profit growth of 9.4%, an acceleration of 5.5 percentage points [1] Sector Analysis - The profit growth of the equipment manufacturing industry was 7.2%, contributing 2.5 percentage points to the overall profit growth of industrial enterprises above designated size, making it one of the strongest driving sectors [1] - The raw materials manufacturing sector also showed rapid profit growth, while the consumer goods manufacturing sector shifted from a decline to an increase in profits [1]

Core Insights - The industrial enterprises' profit growth has turned positive, with a 0.9% year-on-year increase from January to August, reversing a declining trend since May [1][2] - In August alone, profits surged by 20.4%, largely supported by a low base effect from the previous year when profits fell by 17.8% due to adverse weather and insufficient demand [2] - The recovery in profits is attributed to macro policies and market forces working in tandem, including large-scale equipment updates and consumption incentives [2] Profit Dynamics - The increase in profits is not solely due to low base effects; substantial positive changes in the industrial economy are also driving this growth [2] - The improvement in profit margins is more reliant on price increases and profit rate enhancements rather than volume growth [3] - The cost per hundred yuan of revenue has decreased by 0.20 yuan year-on-year, marking the first decline since July 2024 [3] Sector Performance - The equipment manufacturing sector has shown a profit increase of 7.2%, contributing 2.5 percentage points to the overall profit growth of industrial enterprises [3] - High-tech sectors such as artificial intelligence and industrial internet are emerging as new growth points, indicating a shift towards high-quality development [3] - Profits in raw material and consumer goods manufacturing are also improving, reflecting a recovery in the upstream and downstream industrial chains [3] Future Outlook - While the profit growth is a positive sign, challenges remain, including external uncertainties and insufficient domestic demand [4] - Continuous efforts in technological innovation, demand expansion, and environmental optimization are necessary to stabilize and enhance industrial profits [4] - The implementation of new policies aimed at stabilizing growth in key industries is expected to further strengthen the industrial economy [4]

Core Viewpoint - The industrial enterprises' profit growth has turned positive, indicating a recovery in the industrial economy and reflecting the effectiveness of industrial transformation and upgrading [1][2]. Group 1: Profit Growth and Economic Indicators - From January to August, the profit of industrial enterprises above designated size increased by 0.9% year-on-year, reversing the declining trend since May [1]. - In August alone, the profit growth rate surged to 20.4%, supported by a low base effect from the previous year when profits fell by 17.8% due to natural disasters and insufficient demand [2]. - The industrial added value growth rate in August was 5.2%, slightly down from 5.7% in July, while the Producer Price Index (PPI) decreased by 2.9% year-on-year, marking a narrowing of the decline since March [3]. Group 2: Drivers of Profit Recovery - The recovery in profits is driven by macro policies and market forces, including large-scale equipment updates and policies to boost domestic demand [2]. - The improvement in profits is not solely attributed to low base effects; it also reflects substantial positive changes in the industrial economy [2]. - The profit growth is supported by a reduction in costs, with costs per 100 yuan of revenue decreasing by 0.20 yuan, marking the first year-on-year decrease since July 2024 [3]. Group 3: Sectoral Performance and Quality Development - The profit of the equipment manufacturing sector increased by 7.2% year-on-year, contributing 2.5 percentage points to the overall profit growth of industrial enterprises [3]. - High-quality development characteristics are evident in the profit recovery, with emerging fields like high-end equipment and smart manufacturing driving value enhancement [3]. - The integration of new information technologies, such as artificial intelligence and industrial internet, with traditional industries is creating new economic growth points [3]. Group 4: Future Outlook and Recommendations - While the profit growth is a positive signal, challenges remain, including external uncertainties and insufficient domestic demand [4]. - Continuous efforts in technological innovation, demand expansion, and environmental optimization are necessary to stabilize and improve industrial profits [4]. - The promotion of "Artificial Intelligence+" initiatives and the implementation of policies to combat "involution" are essential for enhancing market mechanisms and ensuring sustainable profit growth [4].

Economic Overview - In September, the manufacturing Purchasing Managers' Index (PMI) was 49.8%, an increase of 0.4 percentage points from the previous month, marking two consecutive months of increase [1] - The non-manufacturing business activity index was 50.0%, a decrease of 0.3 percentage points from the previous month, while the composite PMI output index rose to 50.6%, up 0.1 percentage points [1] Manufacturing Sector - Manufacturing production activities accelerated, with the production index at 51.9%, up 1.1 percentage points from the previous month, remaining in the expansion zone for five consecutive months [1] - The new orders index for manufacturing was 49.7%, an increase of 0.2 percentage points, indicating a stabilization in market demand [1] - The new export orders index was 47.8%, up 0.6 percentage points, reflecting a narrowing decline in export demand [1] Industry Performance - In September, the PMI for equipment manufacturing, high-tech manufacturing, and consumer goods industries were 51.9%, 51.6%, and 50.6% respectively, all significantly above the manufacturing average [2] - Large enterprises showed stable growth with a PMI of 51.0%, while small enterprises improved slightly with a PMI of 48.2%, up 1.6 percentage points [2] Future Outlook - The average PMI for the manufacturing sector in Q3 was 49.5%, indicating a slight recovery compared to Q2 and the same period last year [3] - Expectations for manufacturing activities are positive, with a production and operation expectation index of 54.1%, up 0.4 percentage points, suggesting improved market outlook [2][3] - The non-manufacturing business activity index remained stable at 50%, indicating steady performance in the sector [3] Financial Sector - The financial sector's business activity index rose above 60%, with new orders also increasing, indicating strong support for the real economy [4] - The telecommunications and software services sectors maintained high business activity indices, reflecting ongoing growth in new economy sectors [4] Policy and Demand - There is an expectation for macroeconomic policies to be strengthened in Q4, which may boost market confidence and demand [5] - Seasonal factors such as holidays and promotional events are anticipated to enhance consumer demand in the coming months [3][5]

Group 1 - In September, the Manufacturing Purchasing Managers' Index (PMI) was 49.8%, an increase of 0.4 percentage points from the previous month, indicating a slight acceleration in overall economic output [1] - The Production Index for manufacturing reached 51.9%, up 1.1 percentage points, marking a six-month high, suggesting active manufacturing production [1] - Key industries such as equipment manufacturing, high-tech manufacturing, and consumer goods showed PMIs of 51.9%, 51.6%, and 50.6% respectively, all above the manufacturing average, indicating robust supply and demand [1] Group 2 - The Production and Business Activity Expectation Index for manufacturing was 54.1%, up 0.4 percentage points, reflecting positive market outlook among manufacturers [2] - The Non-Manufacturing Business Activity Index was 50.0%, down 0.3 percentage points, indicating stability in the non-manufacturing sector, while the Service Sector Index remained in the expansion zone at 50.1% [2] - Certain sectors like postal, telecommunications, and financial services maintained high business activity indices above 60.0%, while sectors closely related to consumer spending, such as dining and entertainment, fell below the critical point [2] Group 3 - Overall, September's macroeconomic indicators showed a stable improvement, with multiple positive factors contributing to increased market vitality [3] - Looking ahead to the fourth quarter, macroeconomic policies are expected to be intensified, providing new momentum and confidence to the market [3]

Economic Overview - In September, the manufacturing Purchasing Managers' Index (PMI) was 49.8%, an increase of 0.4 percentage points from the previous month, marking two consecutive months of increase [1] - The non-manufacturing business activity index was 50.0%, a decrease of 0.3 percentage points from the previous month, indicating stability in the non-manufacturing sector [1] - The comprehensive PMI output index rose to 50.6%, up 0.1 percentage points from the previous month, suggesting a slight acceleration in overall economic output [1] Manufacturing Sector - Manufacturing production activities accelerated, with the production index at 51.9%, up 1.1 percentage points from the previous month, remaining in the expansion zone for five consecutive months [1] - The new orders index for manufacturing was 49.7%, an increase of 0.2 percentage points from the previous month, indicating a stabilization in market demand [1] - The new export orders index was 47.8%, up 0.6 percentage points from the previous month, reflecting a narrowing decline in export demand [1] New Growth Drivers - In September, the PMIs for equipment manufacturing, high-tech manufacturing, and consumer goods were 51.9%, 51.6%, and 50.6% respectively, all significantly above the manufacturing average [2] - Large enterprises showed stable growth with a PMI of 51.0%, while small enterprises improved slightly with a PMI of 48.2%, up 1.6 percentage points from the previous month [2] - The manufacturing production and business activity expectation index was 54.1%, indicating positive market expectations among manufacturers [2] Non-Manufacturing Sector - The non-manufacturing business activity index remained stable at 50%, despite a slight decrease from the previous month [3] - The service sector PMI was 50.1%, down 0.4 percentage points from August, reflecting seasonal trends and the timing of the Mid-Autumn Festival [3][4] - Financial services showed strong performance with a business activity index above 60%, indicating robust support for the real economy [4] Future Outlook - The third quarter average manufacturing PMI was 49.5%, indicating a consolidation of economic recovery compared to the second quarter and the same period last year [3] - Expectations for the fourth quarter include increased macroeconomic policies to boost market confidence and demand, driven by holiday consumption and infrastructure projects [3][4] - The non-manufacturing sector is expected to stabilize and recover, supported by seasonal effects and ongoing macroeconomic adjustments [4]