1. Report Industry Investment Rating No relevant content provided. 2. Core Views of the Report - The Chinese economy shows a mixed picture with stable GDP growth, but some indicators like PPI and export growth face challenges [1]. - Infrastructure investment is expected to accelerate, with most institutions forecasting a 6% growth in full - year infrastructure construction investment [2][17]. - The bond market has a complex situation with different trends in yields and prices, and the money market rates are mostly declining [24][25][26]. - The stock market has different performances in A - shares and Hong Kong stocks, and the insurance capital's active participation and IPO inspections are notable [34]. 3. Summary by Directory Macro Data - GDP in Q1 2025 grew 5.4% year - on - year, the same as the previous quarter [1]. - In June 2025, the manufacturing PMI was 49.7%, up from 49.5% in the previous month, and the non - manufacturing PMI was 50.5%, up from 50.3% [1]. - In May 2025, social financing scale increment was 22870 billion yuan, M0 grew 12.1% year - on - year, M1 grew 2.3%, and M2 grew 7.9% [1]. Commodity Investment Comprehensive - The Chinese government hopes to promote healthy and sustainable Sino - US economic and trade relations [2][3][17]. - The US "big and beautiful" tax and spending bill will raise the debt ceiling by 5 trillion dollars and may increase the budget deficit by 3.4 trillion dollars in the next decade [3]. - The US non - farm employment in June increased by 147,000, and the unemployment rate was 4.1% [3]. Metal - Peruvian copper mine transportation is disrupted due to protests by small miners [5][9]. - UBS raised its copper price forecasts for 2025 and 2026 by 7% and 4% respectively [5]. - Central banks are increasing gold reserves due to the "weaponization" of foreign exchange [6]. Coal, Coke, Steel and Minerals - Indonesia plans to change the mining quota validity period from three years to one year [9]. - China is summarizing the implementation of the "14th Five - Year Plan" for mineral resources and planning for the "15th Five - Year Plan" [5][9]. Energy and Chemicals - China's first natural gas full - chain multi - condition cryogenic treatment plant is put into operation [10]. - OPEC+ is discussing an 8 - month oil production increase of 411,000 barrels per day [12]. Agricultural Products - China's Ministry of Agriculture and Rural Affairs launches an action to ensure autumn grain harvest [14]. - The second import corn auction is about to start with changes in quantity, area and target [14]. Financial News Open Market - On July 3, the central bank conducted 57.2 billion yuan of 7 - day reverse repurchase operations, with a net withdrawal of 452.1 billion yuan [16]. Key News - In June, the Caixin China Services PMI was 50.6, and the composite PMI output index rebounded to 51.3 [17]. - From January to May, China's service import and export totaled 32543.6 billion yuan, a year - on - year increase of 7.7% [18]. Bond Market - Bank - to - bank bond yields were generally stable with a slight decline, and the money market was more liquid [24]. - The on - shore RMB against the US dollar rose 59 points, and the US dollar index rose 0.35% [29]. Research Reports - Guoxin Macro Fixed Income expects China's CPI to decline slightly in June and PPI to continue to fall [30]. - Yangtze River Fixed Income believes that liquidity will remain relatively loose in July [30]. Stock Market - On Thursday, A - shares rose, with consumer electronics and innovative drugs leading the gains, while Hong Kong stocks fell [34]. - Insurance funds have accelerated their pace of stock market participation, and banks and public utilities are major targets [34]. - The China Securities Association announced the list of 12 IPO on - site inspection enterprises in the second batch of 2025 [35].

1. Report Industry Investment Rating The provided content does not mention the report industry investment rating. 2. Core Viewpoints of the Report - For investment - grade bonds, understand various spreads in terms of liquidity premium, and in a bond bull market, seize the opportunity to intervene when negative events cause the variety premium to rise. For high - yield bonds, the proportion of credit risk premium factors increases, and low - quality varieties should focus on the macro - credit environment and local credit environment. - When comparing AAA - and AA+ rated commercial bank secondary capital bonds and perpetual bonds, it is recommended to give priority to perpetual bonds due to their higher yields and better liquidity. For AA - rated bonds, when the spread between the two is high, consider intervening in perpetual bonds [103][105]. 3. Summary According to the Table of Contents 3.1 Commercial Bank Secondary Capital Bonds and Perpetual Bonds: Basic Introduction - **Definition of Secondary Capital Bonds**: Issued by commercial banks, with the repayment order of principal and interest payment after depositors and general creditors, and before equity capital, other Tier - 1 capital instruments, and hybrid capital bonds, following relevant regulations [4]. - **Important Terms**: Include subordination clause, write - down clause, and call option. The call option can be exercised at least 5 years after issuance, subject to regulatory approval and prior notice [5][7]. - **Main Features**: The amount that can be included in Tier - 2 capital decreases year - by - year in the last five years before maturity. The common term is N + 5, with 5 + 5 being the most common (86%). Since 2018, 40.8 billion yuan of secondary capital bonds have not been redeemed, accounting for 1.8% of callable bonds [9]. 3.2 Basic Overview of China's Commercial Bank Secondary Capital Bonds - **Issuance Volume and Maturity Distribution**: From 2013 to 2024, a total of 6.27 trillion yuan of commercial bank secondary capital bonds were issued, with an average annual issuance of 522.5 billion yuan. The average annual net financing in the past five years was 411 billion yuan. The maturities are concentrated in 5 + 5 (84%) and 10 + 5 (14%) [11]. - **Issuer Distribution**: By type, large commercial banks account for 58% of the issuance, followed by joint - stock banks (22%), city commercial banks (15%), rural commercial banks (4.9%), foreign - funded banks (0.2%), and private banks (0.1%). The top 20 issuers account for 82.9% of the issuance, the top 10 account for 71.3%, and the top 4 account for 49.4%. Industrial and Commercial Bank of China has the largest issuance (14.3%), followed by Bank of China (12.7%) [17]. - **Rating Distribution**: In terms of issuer ratings, AAA - rated issuances account for 93.7%, AA+ for 3.9%, AA for 1.3%, AA - for 0.7%, and others for 0.5%. In terms of bond ratings, AAA - rated issuances account for 82.4%, AA+ for 8.5%, AA for 5.3%, AA - for 2.2%, and others for 1.6%. 10% of issuers have the same bond rating and issuer rating, while for others, the bond rating is lower than the issuer rating [24]. - **Trading Volume**: The liquidity of commercial bank secondary capital bonds is increasing. In 2024, the annual trading volume was 8.028 trillion yuan, and the turnover rate was as high as 198%. The top 20 issuers in trading volume accounted for 89.1%, the top 10 accounted for 75.9%, and the top 4 accounted for 52.3% [25]. - **Latest Stock Situation**: As of the end of April 2025, there were 508 secondary capital bonds in the market, with a balance of 4.2448 trillion yuan and an average scale of 8.4 billion yuan. There were 249 issuers, among which large commercial banks accounted for 58%, joint - stock banks 23%, city commercial banks 14%, and rural commercial banks 5%. The average term was 3.04 years, with 16.7% having a term of 2 - 3 years and 16.7% having a term of 1 - 2 years [28]. - **Investors**: Commercial banks, commercial bank wealth management products, and other non - legal person products are the main investors. At the end of 2020, according to China Central Depository & Clearing Co., Ltd., commercial banks accounted for 30.6%, commercial bank wealth management products 26.3%, other non - legal person products 34.5%, insurance institutions 4.7%, policy banks 2.4%, and overseas institutions 0.8%. As of the first quarter of 2025, public funds held 200.1 billion yuan of commercial bank secondary capital bonds (with an average term of 2.45 years), and the credit quality of the issuers held by public funds was weaker than the market average [39][40]. 3.3 Basic Overview of China's Commercial Bank Perpetual Bonds - **Issuance Volume and Stock Distribution**: Since 2019, a total of 3.22 trillion yuan of commercial bank perpetual bonds have been issued, with an average annual issuance of 510 billion yuan. The term is 5 + N. As of April 30, 2025, there were 240 commercial bank perpetual bonds in the market, with a balance of 2.4605 trillion yuan [43]. - **Issuer Distribution**: Compared with secondary capital bonds, the issuers of perpetual bonds are more concentrated in companies with better credit quality, and the number of rural commercial bank issuers has significantly decreased. The top 20 issuers account for 88.8% of the issuance, the top 10 account for 71.5%, and the top 5 account for 51.9%. Agricultural Bank of China has the largest issuance (16.8%), followed by Bank of China (10.3%) [48]. - **Rating Distribution**: In terms of issuer ratings, AAA - rated issuances account for 96.3%, AA+ for 3.1%, and AA for 0.6%. In terms of bond ratings, AAA - rated issuances account for 88.9%, AA+ for 6.9%, AA for 3.5%, AA - for 0.6%, and A+ for 0.1%. 35% of issuers have the same bond rating and issuer rating, while for others, the bond rating is lower than the issuer rating [58]. - **Trading Volume**: The liquidity of commercial bank perpetual bonds is good, and the turnover rate is increasing. In 2024, the annual trading volume was 6.298 trillion yuan, and the turnover rate was as high as 253%. The top 20 issuers in trading volume accounted for 86.9%, the top 10 accounted for 69%, and the top 5 accounted for 44.5% [59]. - **Issuers' Implied Ratings in the ChinaBond Market**: In the latest ChinaBond market implied rating distribution, there are 6 AAA - issuers (2.4%), 15 AA+ issuers (6.0%), and 32 AA issuers (12.9%). Among the AA+ issuers in the ChinaBond implied rating, there are 9 joint - stock commercial banks, 5 city commercial banks, and 1 rural commercial bank [64]. 3.4 Yield Fluctuation Rules of Commercial Bank Secondary Capital Bonds and Perpetual Bonds - **Commercial Bank Secondary Capital Bonds**: The yield of commercial bank secondary capital bonds fluctuates cyclically, similar to the national debt cycle. As of April 30, 2025, the average yields to maturity of 5 - year AAA -, AA+, and AA commercial bank secondary capital bonds were 3.44%, 3.54%, and 3.85% respectively, and the lowest yields appeared on January 3, 2025. The spreads between different ratings also fluctuate cyclically [72]. - **Commercial Bank Secondary Capital Bonds vs. Commercial Bank Ordinary Bonds**: From 2019 to the present, the average spreads of 5 - year AAA -, AA+, and AA bonds were 37BP, 42BP, and 63BP respectively, and the current spreads are at historical lows. The spread trend is positively correlated with that of commercial bank ordinary bonds. Events such as the write - down of Baoshang Bank's secondary capital bonds and changes in valuation methods have affected the spread [73][78]. - **Commercial Bank Secondary Capital Bonds vs. Non - financial Corporate Credit Bonds**: The yield trends of secondary capital bonds, medium - term notes, and urban investment bonds are very similar, and the absolute levels of yields are also relatively close. Currently, the yields of various grades of commercial bank secondary capital bonds are slightly lower than those of medium - term notes [82]. - **Commercial Bank Perpetual Bonds vs. Secondary Capital Bonds**: Since August 2021, the average spreads between perpetual bonds and secondary capital bonds for AAA - have been 12BP, AA+ 11BP, AA 24BP, and AA - 48BP. The spreads between AAA - and AA+ are relatively stable, while those between AA and AA - fluctuate greatly [89]. 3.5 Investment Outlook - **Differentiate between Investment - grade and High - yield Bonds**: For investment - grade bonds, understand spreads based on liquidity premium and seize opportunities in a bond bull market. For high - yield bonds, focus on credit risk premium. - **Comparison between Commercial Bank Secondary Capital Bonds and Perpetual Bonds**: For AAA - and AA+ bonds, prefer perpetual bonds. For AA - rated bonds, consider perpetual bonds when the spread is high [103][105].