1. Report Industry Investment Rating No relevant content provided. 2. Core Viewpoints of the Report - In March, the manufacturing PMI exceeded seasonal expectations and returned above the boom - bust line, with the production index seasonally rebounding, both domestic and external demand improving, and enterprises actively replenishing inventories. The service industry PMI returned to the expansion range, while the construction industry was still in the contraction range, and cost - rising pressure emerged. The subsequent focus should be on international situation changes and promoting various economic - stabilizing policies [1][10]. - The improvement in the manufacturing PMI in March led to some adjustments in the bond market. The current core driving factors of the market are the Middle East situation, inflation expectations, and the increasing allocation power in the bond market. Ultra - long - term interest rates have entered a stage of restorative decline, and the bond market is expected to be volatile and bullish. Future attention should be paid to the persistence of the decline in risk appetite, the situation of fundamental recovery, and the special treasury bond issuance plan in Q2 [4][36]. 3. Summary by Relevant Catalogs 3.1 3 - month PMI Data Review - Manufacturing: In March, the manufacturing PMI was 50.4%, a 1.4 - percentage - point increase from the previous month, returning above the boom - bust line after two months. The production index seasonally recovered, both domestic and external demand improved, the price index rebounded significantly, enterprises actively replenished inventories, and procurement volume returned to the expansion range [10]. - Non - manufacturing: The service industry PMI returned to the expansion range, and the construction industry's contraction slowed down. In March, the service industry business activity index rose 0.5 percentage points to 50.2%, and the construction industry business activity index rose 1.1 percentage points to 49.3%. However, the month - on - month performance of both was weaker than the non - epidemic Spring Festival seasonality [12][15]. 3.2 Manufacturing: Simultaneous Improvement in Production and Demand, and a Significant Rebound in the Price Index - Production: The manufacturing PMI production index in March was 51.4%, a 1.8 - percentage - point increase from the previous month, returning to the expansion range. This was due to the return of employees after the Spring Festival, the recovery of market demand, and the further manifestation of policy effects [16]. - Demand: Both domestic and external demand improved. The proportion of manufacturing enterprises reporting insufficient market demand dropped to below 50% for the first time since July 2022. The new order and new export order indexes increased by 3.0 and 4.1 percentage points respectively. SMEs stabilized, and three key industries expanded rapidly [18][20]. - Price: Affected by rising commodity prices and accelerated corporate procurement, the main raw material purchase price index and ex - factory price index rose by 9.1 and 4.8 percentage points respectively. The ex - factory price index reached a new high since April 2022, indicating that the year - on - year growth rate of PPI in March is expected to turn positive [22]. - Inventory: Enterprises actively replenished inventories, and procurement volume returned to the expansion range. The raw material inventory and finished - product inventory indexes increased by 0.2 and 0.9 percentage points respectively, and the procurement volume index rose to 50.9% [23]. 3.3 Non - manufacturing: Service Industry PMI Returns to Expansion, Construction Industry's Contraction Slows Down - Service Industry: In March, the service industry's prosperity increased slightly by 0.5 percentage points, returning above the boom - bust line. Industries such as railway transportation, telecommunications, and finance were in a high - prosperity range, while consumer - related industries declined due to the high base of Spring Festival consumption [29]. - Construction Industry: In March, the construction industry business activity index rose 1.1 percentage points to 49.3%. The civil engineering construction industry showed a significant increase, while the housing construction industry was still below 50%. The overall recovery was slower than in previous post - holiday periods [32]. 3.4 Impact on the Bond Market - In March, the manufacturing PMI exceeded seasonal expectations, the service industry PMI returned to expansion, but the construction industry was still in contraction, and cost - rising pressure emerged. The bond market adjusted due to the improvement in the manufacturing PMI. The current core driving factors are the Middle East situation, inflation expectations, and the increasing allocation power in the bond market. The bond market is expected to be volatile and bullish, and future attention should focus on risk appetite, fundamental recovery, and the special treasury bond issuance plan in Q2 [36].

Group 1: PMI Overview - The manufacturing PMI for March is 50.4%, an increase of 1.4 percentage points from the previous month, indicating a return to the expansion zone[1] - The production index for manufacturing rose to 51.4%, up 1.8 percentage points, reflecting accelerated manufacturing activity[3] - The new orders index for manufacturing increased to 51.6%, a rise of 3 percentage points, marking a return to the expansion zone after two months below 50%[3] Group 2: Economic Conditions - The composite PMI output index is 50.5%, up 1.0 percentage points from last month, indicating overall improvement in business activities[8] - The non-manufacturing business activity index is at 50.1%, an increase of 0.6 percentage points, ending two consecutive months below 50%[7] - The equipment manufacturing new orders index rose over 3 percentage points to above 53%[1] Group 3: Price Trends and Cost Pressures - The raw material purchase price index surged to 63.9%, a significant increase of 9.1 percentage points, indicating rising costs in manufacturing[5] - The ex-factory price index rose to 55.4%, up 4.8 percentage points, remaining in the expansion zone for three consecutive months[6] - The geopolitical situation in the Middle East has contributed to rising costs, particularly in the petrochemical sector, affecting the supply chain[6] Group 4: Employment and Business Sentiment - The employment index remains low at 48.6%, indicating ongoing employment pressures and insufficient hiring willingness[21] - The business expectations index for manufacturing rose to 53.4%, up 0.2 percentage points, reflecting optimism among manufacturers[2] - Large enterprises have a PMI of 51.6%, while small and medium enterprises have PMIs of 49% and 49.3%, respectively, showing marginal improvement in smaller firms[4]

Group 1: PMI Overview - In March, the manufacturing PMI recorded 50.4%, up 1.25 percentage points from the average of January-February[2] - The services PMI reached 50.2%, increasing by 0.6 percentage points compared to the January-February average[2] - The construction PMI rose to 49.3%, up 0.8 percentage points from the January-February average[2] Group 2: Demand and Supply Dynamics - Manufacturing PMI returned above the threshold, indicating improved supply and demand post-Spring Festival[5] - New orders and new export orders indices increased to 51.6% and 49.1%, respectively, both up by 2.7 percentage points from January-February[5] - Manufacturing production index rose to 51.4%, up 1.3 percentage points from January-February[5] Group 3: Price Trends - Raw material purchase prices index and factory prices index reached 63.9% and 55.4%, respectively, both hitting new highs for 2023[5] - Raw material prices saw a significant increase, with the monthly rise being the second highest since 2005[5] Group 4: Sector-Specific Insights - The construction sector showed signs of recovery, with the business activity index for March at 49.3%, indicating a rise in infrastructure investment activities[5] - The services sector's business activity index was 50.2%, with certain industries like telecommunications and finance showing strong growth, while retail and hospitality lagged[5] Group 5: Risks and Outlook - Risks include slower-than-expected domestic demand recovery, changes in domestic policies, and fluctuations in the international trade environment[3]

Core Viewpoint - The supply-demand imbalance is showing signs of improvement, with demand growth outpacing supply growth in early 2026, indicating a potential recovery in midstream profitability [2][4][12]. Group 1: Observations on Supply-Demand Imbalance - Overall, the supply-demand imbalance is improving, with industrial output growth at 6.3% in January-February 2026, while combined demand growth from fixed investment, retail sales, and exports reached 6.6% [4][13]. - In terms of structure, the midstream manufacturing supply-demand contradiction is easing, with a rolling one-year demand growth rate of 9.6% in January-February 2026, up from 8.4% previously [4][14]. - The production-sales ratio is narrowing its decline, with a year-on-year drop of -0.1% in 2023, expected to expand to -0.5% in 2024, and slightly narrow to -0.4% in 2025 [5][17]. - Price levels are recovering beyond just bulk commodities, with PPI declines narrowing and midstream equipment manufacturing showing strong month-on-month growth [5][20]. Group 2: Economic Data Analysis for January-February - Industrial output growth is strong, with equipment manufacturing growth at 9.3%, significantly contributing to overall industrial growth [6][36]. - Real estate sales and investment declines are narrowing, with sales area down -13.5% year-on-year in January-February 2026, compared to -15.6% in December 2025 [6][30]. - Retail sales growth is recovering, with a year-on-year increase of 2.8% in January-February 2026, up from 0.9% in December 2025 [7][27]. - Fixed asset investment growth is rebounding, with a total investment in projects of over 100 million yuan growing by 5.0% year-on-year in January-February 2026 [7][41].

Manufacturing Sector Insights - In February, the manufacturing PMI decreased by 0.3 points to 49.0, with high-tech manufacturing PMI at 51.5, down 0.5 points[3] - The consumer goods manufacturing PMI increased by 0.5 points to 48.8, showing seasonal strength related to the Spring Festival[3] - Among 17 sub-sectors, non-metallic mineral products PMI rose by 1.8 points, while specialized equipment saw a decline of 5.0 points[5] Price Trends - In February, the factory price index remained flat compared to the previous month, with notable increases in sectors like petroleum processing (up 15.5 points) and general equipment (up 3.1 points)[7] - Several industries, including non-ferrous metallurgy and chemical fibers, experienced significant price declines, with non-ferrous metallurgy down 10.2 points[7] Economic Outlook - The service sector PMI rose by 0.2 points to 49.7, with significant increases in hospitality and entertainment sectors, reflecting a "long holiday effect" on consumer spending[12] - The construction sector showed a slight recovery, with housing construction PMI up 1.3 points, although overall construction PMI fell by 0.6 points to 48.2[10] Emerging Industries - The new energy sector is the only strategic emerging industry with a PMI above 50, increasing by 5.2 points, indicating expansion[9] - Energy-saving and environmental protection industries also saw improvements, with PMIs rising by 3.1 points, reflecting government support for eco-friendly projects[9]

Core Viewpoint - The February PMI further declined, likely due to the long and late Spring Festival holiday imposing significant constraints on the supply side [3][9]. Manufacturing PMI - In February, the manufacturing PMI dropped by 0.3 percentage points to 49%, influenced by the long Spring Festival holiday, which lasted 9 days, the longest on record [3][4][9]. - The production index fell more sharply than the new orders index, with the production index down 1 percentage point to 49.6%, while the new orders index decreased by 0.6 percentage points to 48.6% [3][12]. - The internal demand orders index fell by 0.3 percentage points to 49.1%, and the new export orders index dropped by 2.8 percentage points to 45% [3][12]. Industry Analysis - The Spring Festival holiday caused widespread impacts across industries, with capital-intensive industries experiencing significant declines in PMI, while labor-intensive industries maintained low levels of activity [4][16]. - High-tech manufacturing and equipment manufacturing PMIs fell by 0.5 and 0.3 percentage points to 51.5% and 49.8%, respectively [4][16]. - Labor-intensive sectors like consumer goods manufacturing and high-energy industries maintained low PMIs of 48.8% and 47.8% [4][19]. Non-Manufacturing PMI - The non-manufacturing PMI showed asymmetric effects from the Spring Festival, with the construction PMI continuing to decline, while service-related PMIs improved [4][18]. - The construction PMI fell by 0.6 percentage points to 48.2%, while the service PMI increased by 0.2 percentage points to 49.7% [4][18]. - Sectors related to consumer travel, such as accommodation and dining, had PMIs above 60%, indicating high levels of activity, while retail and air transport PMIs rose above 52% [4][18]. Future Outlook - With the resumption of work and production alongside increased domestic demand policies, the PMI may rebound, with a focus on marginal changes in domestic demand [5][22]. - Despite the short-term disruptions from the Spring Festival, expectations for manufacturing and construction have improved, with production activity indices rising [5][22]. - The government's focus on expanding domestic demand and promoting consumption is gradually becoming more effective, suggesting that the resilience of domestic demand may surpass that of external demand [5][22]. Regular Tracking - The manufacturing PMI continued to decline, with new orders and export orders indices both falling [6][28]. - The service PMI saw a slight increase, but the new orders index decreased by 1.4 percentage points to 45.7% [6][34]. - The construction PMI continued to decline, with the new orders index showing a marginal increase of 2.1 percentage points to 42.2% [6][38].

Manufacturing Sector - The manufacturing PMI for February 2026 is reported at 49.0%, down 0.3 percentage points from January and below the expected 49.7%[2][5] - The production index decreased by 1.0 percentage points to 49.6%, and the new orders index fell by 0.6 percentage points to 48.6%[5][14] - Large enterprises saw an increase in PMI by 1.2 percentage points to 51.5%, while small enterprises dropped by 2.6 percentage points to 44.8%, the lowest level since 2023[6] Price Trends - The purchasing price index for raw materials decreased by 1.3 percentage points to 54.8%, indicating a slowdown in price increases[24] - The factory price index remained stable at 50.6%, suggesting a reduction in cost pressure for enterprises[24] Service Sector - The service sector PMI rose by 0.2 percentage points to 49.7%, driven by increased consumer spending during the Spring Festival[29] - Despite the increase, the service sector PMI has remained below the expansion threshold for four consecutive months[31] Construction Sector - The construction PMI fell by 0.6 percentage points to 48.2%, influenced by the return of workers during the Spring Festival[32] - The new orders index for construction increased by 2.1 percentage points to 42.2%, but still indicates low activity levels[32]

Manufacturing PMI - February Manufacturing PMI decreased by 0.3 percentage points to 49% from the previous month's 49.3%[1] - The production index fell by 1 percentage point to 49.6%, while the new orders index declined by 0.6 percentage points to 48.6%[2] - New export orders dropped significantly by 2.8 percentage points to 45%[2] Non-Manufacturing PMI - Non-Manufacturing PMI slightly increased by 0.1 percentage points to 49.5% from 49.4% in January[1] - The construction sector's PMI fell by 0.6 percentage points to 48.2%, while the service sector's PMI improved by 0.2 percentage points to 49.7%[3] - Sectors related to consumer travel, such as accommodation and catering, showed high PMI levels above 60%[3] Industry Impact - Capital-intensive industries experienced a significant PMI decline, with high-tech manufacturing and equipment manufacturing dropping to 51.5% and 49.8%, respectively[3] - Labor-intensive sectors like consumer goods manufacturing and high-energy industries maintained low PMI levels at 48.8% and 47.8%[3] Future Outlook - The PMI is expected to rebound as production resumes and domestic demand policies are strengthened, with a focus on marginal changes in domestic demand[4] - Manufacturing and construction sectors show improved expectations, with production activity indices rising to 53.2% and 50.9% respectively[4]

Core Viewpoint - The February PMI further declined, likely due to the long and late Spring Festival holiday imposing significant constraints on the supply side [3][9][45] Manufacturing PMI - The manufacturing PMI fell by 0.3 percentage points to 49% in February, influenced by the long Spring Festival holiday [3][9][45] - The actual PMI, excluding weather-related factors, dropped by 0.6 percentage points to 48.7% [9] - The production index decreased by 1 percentage point to 49.6%, while the new orders index fell by 0.6 percentage points to 48.6% [12][45] - The internal demand orders index declined by 0.3 percentage points to 49.1%, and the new export orders index decreased by 2.8 percentage points to 45% [12][45] Industry Analysis - The Spring Festival holiday caused widespread impacts across industries, with capital-intensive sectors experiencing significant declines in PMI [4][16][46] - High-tech manufacturing and equipment manufacturing PMIs fell by 0.5 and 0.3 percentage points to 51.5% and 49.8%, respectively [4][46] - Labor-intensive sectors like consumer goods manufacturing and high-energy-consuming industries maintained low PMIs of 48.8% and 47.8% [4][19][46] Non-Manufacturing PMI - The non-manufacturing PMI showed asymmetric effects from the Spring Festival, with the construction PMI continuing to decline while service sector PMIs improved [4][18][36] - The construction PMI fell by 0.6 percentage points to 48.2%, while the service PMI rose by 0.2 percentage points to 49.7% [4][18][36] - Sectors related to consumer travel, such as accommodation and catering, had PMIs above 60%, indicating high prosperity [18][46] Future Outlook - With the resumption of work and production alongside increased domestic demand policies, the PMI may rebound, with a focus on marginal changes in domestic demand [5][22][47] - Despite short-term disruptions from the Spring Festival, expectations for manufacturing and construction have improved, with production activity indices rising [22][47] - The effectiveness of policies aimed at expanding domestic demand and promoting consumption is gradually increasing, suggesting that domestic demand recovery may be more resilient than external demand [22][47] Regular Tracking - Manufacturing PMI continued to decline, with new orders and export orders indices also falling [28][30] - The service PMI saw a slight increase, but the new orders index decreased by 1.4 percentage points to 45.7% [34][36] - The construction PMI continued to decline, with the new orders index marginally increasing by 2.1 percentage points to 42.2% [38][40]

Group 1: PMI Overview - The manufacturing PMI for February is reported at 49%, down from 49.3% in January[7] - The non-manufacturing PMI is at 49.5%, slightly up from 49.4% in the previous month[7] Group 2: Factors Influencing PMI - The decline in February PMI is attributed to the extended and late Spring Festival holiday, which constrained supply[2] - The manufacturing PMI fell by 0.3 percentage points, while the production index dropped by 1 percentage point to 49.6%[2][16] - New orders index decreased by 0.6 percentage points to 48.6%, with domestic orders down 0.3 percentage points to 49.1% and new export orders down 2.8 percentage points to 45%[2][16] Group 3: Industry Impact - Capital-intensive industries saw a significant PMI drop, while labor-intensive sectors remained at low levels[3] - High-tech manufacturing PMI decreased by 0.5 percentage points to 51.5%, and equipment manufacturing PMI fell by 0.3 percentage points to 49.8%[3][26] - The construction PMI declined by 0.6 percentage points to 48.2%, while service sector PMI improved by 0.2 percentage points to 49.7%[3][27] Group 4: Future Outlook - There is an expectation for PMI to rebound due to the resumption of work and increased domestic demand policies[4] - The manufacturing and construction sectors show signs of improvement, with production activity expectations rising by 0.6 percentage points to 53.2%[4][35] - The focus on expanding domestic demand and promoting consumption is expected to enhance resilience in the economy[4]