Summary of Key Points from the Conference Call Industry Overview - **Industry**: China State-Owned Enterprises (SOEs) - **Market Dynamics**: The sector has experienced strong compression due to a widening offshore/onshore yield differential, leading to increased demand for China USD bonds and reduced supply from Chinese issuers turning to cheaper onshore funding [1][4][20]. Core Insights - **Credit Ratings**: China SOEs' credit ratings are anchored to China's sovereign rating, which is rated A1/A+/A by Moody's/S&P/Fitch. The outlooks are negative/stable/stable, respectively. The improving fundamentals from SOE reforms provide comfort against fallen angel risks [1][4][39][45]. - **US Sanctions Risk**: The primary risk for China SOEs remains US sanctions, particularly for companies like CNOOC and ChemChina. However, strong demand from Chinese investors is expected to absorb any potential spread widening due to sanctions [1][4][57][63]. - **Investment Recommendations**: J.P. Morgan recommends selective investments in COSL '30s, SINOCH '31s, and CNOOC '32s, highlighting their suitability for investors seeking low-beta exposure to Asia credit [1][4][26]. Financial Metrics - **Spread Compression**: The JACI China single-A Corporate Index has seen its z-spread tighten from z+220 in late 2022 to z+109, indicating strong technical support in the market [4][26]. - **Yield Differential**: The yield differential between offshore and onshore bonds has widened to approximately 290 basis points as of September 2025, influencing demand dynamics [14][20]. - **Profitability Metrics**: The average net profit margin for China SOEs improved from 11% to 13% from 2021 to 2024, while return on equity (ROE) rose from 6% to 8% during the same period, reflecting improving fundamentals [48][50][55]. Additional Insights - **Supply and Demand Imbalance**: The demand for China USD credit has increased, particularly from Chinese banks, while supply has decreased due to higher offshore borrowing costs. This has led to a significant reduction in dollar bond issuance by Chinese issuers [15][20]. - **Regulatory Focus**: The Chinese government is emphasizing SOE efficiency, with new assessment criteria focusing on stable profit growth and improvements in R&D expenditure intensity and labor productivity [48][49]. - **Sanction Lists**: The US has established multiple sanction lists relevant to China SOEs, including the NS-CMIC and CMC lists, which impose various restrictions on investment and business operations [58][61]. Conclusion - The China SOE sector presents a complex landscape characterized by improving fundamentals, strong technical support, and significant risks from US sanctions. Investors are advised to approach the sector selectively, focusing on specific bonds that offer better relative value while being mindful of the broader geopolitical context.

Summary of Key Points from the Conference Call Industry Overview - **Industry**: Inbound Travel in China - **Growth Potential**: Inbound visitation is projected to generate US$2-4 trillion in cumulative revenue over the next decade, despite uncertainties in domestic demand and trade frictions [1][3][4]. Core Insights - **Tourism Service Exports**: China's tourism service exports grew by 67% year-over-year (YoY) in the first half of 2025, significantly outpacing the 14% growth in total service exports and 6% in product exports [2][39]. - **GDP Contribution**: Inbound tourism receipts contributed 0.5% to China's GDP in 2024, up from 0.3% in 2023, but still below the ~1% level seen before COVID-19 [2]. - **Visitor Growth Factors**: Key drivers for increased inbound tourism include longer stays, a higher percentage of foreign visitors compared to those from Hong Kong and Macau, and a potential rise in business travelers [3][4]. Airline Industry Insights - **Airlines' Performance**: In the first half of 2025, international routes accounted for over 60% of the increase in China's air passenger turnover compared to the same period in 2024 [5][31]. - **Pricing Power Challenges**: Domestic demand remains depressed, delaying the expected pricing power inflection for airlines. The current high utilization rates have not translated into higher pricing elasticity [5][32][36]. - **Sustainability Concerns**: The aggressive expansion into international routes by Chinese airlines is viewed as unsustainable without generating profits, necessitating "anti-involution" efforts to avoid deflationary pressures [5][33][34]. Visitor Demographics and Trends - **Visitor Recovery**: Foreign visitation in Beijing has recovered to 90% of pre-COVID levels, with a 120% recovery for foreign tourists overall [12][61]. - **Visa-Free Entries**: Over 70% of foreign visitors entered China visa-free in 2Q25, a significant increase from approximately 50% before the relaxation of visa requirements [57][75]. Economic and Policy Factors - **Shopping as a Growth Driver**: China's potential as a shopping destination is highlighted, driven by global trade barriers and inflation pressures, making Chinese consumer goods more attractive [28][29]. - **Government Initiatives**: The Chinese government has implemented several policies to facilitate inbound travel, including visa relaxations, improved payment systems, and enhanced digital services for tourists [18][29][83]. Revenue Forecast Adjustments - **Revenue Growth Projections**: The base case for 10-year cumulative revenue remains largely unchanged, while the bull case is adjusted down by 6% compared to previous estimates [21][96]. - **CAGR Expectations**: A 19% compound annual growth rate (CAGR) for inbound revenue is deemed achievable, supported by factors such as increased visitor spending and longer stays [24][98]. Conclusion - **Outlook**: The inbound travel sector in China is positioned for significant growth, driven by favorable government policies, increased international connectivity, and evolving consumer preferences. However, challenges remain in the airline industry and overall economic conditions that could impact recovery and growth trajectories.

Investment Rating - The report does not explicitly provide an investment rating for the industry Core Insights - Deflationary pressures are worsening in China, primarily due to the impact of tariffs on the Producer Price Index (PPI) and the overall economic environment [1][7] - Core Consumer Price Index (CPI) remains stable at 0.5% year-on-year, indicating some resilience despite broader deflationary trends [2][4] - The PPI has shown a significant decline, with a month-on-month decrease of -0.4%, driven by lower prices in oil, raw materials, and durable consumer goods [3][7] Summary by Sections CPI Analysis - Core CPI year-on-year remained at 0.5% in April, unchanged from March, while month-on-month seasonally adjusted annual rate (SAAR) was 0.7% [2] - Food inflation reached its highest level in five months, primarily due to increased prices for fruit and beef, countering the effects of lower international oil prices [2] PPI Analysis - The PPI year-on-year decreased to -2.7% in April, reflecting ongoing tariff impacts and weaker final demand [6][7] - Specific sectors such as textiles, wood products, chemicals, rubber, and plastics experienced accelerated price declines, indicating significant exposure to the US market [3][7] Outlook - The PPI is expected to slip below -3% year-on-year from the current -2.7% during the May-July period due to less favorable base effects and continued tariff impacts [4] - Core CPI is anticipated to soften sequentially as the effects of PPI pass through, although year-on-year figures may remain resilient due to a low base [4][7]

Summary of the Conference Call Industry Overview - **Industry**: Tourism and Travel - **Key Data**: The travel data for the May Day holiday indicates a nationwide increase in travel activity, with expected growth rates of 5% to 10% in travel volume compared to previous years [1][2] Key Points and Arguments National Travel Data - **Overall Travel Volume**: On May 1, 2024, the total number of travelers reached 33,271.4 million, a month-on-month increase of 56.0% and a year-on-year increase of 6.2% [28] - **Daily Breakdown**: - May 1: 33,271.4 million travelers - May 2: 29,275.4 million travelers, down 12% from the previous day but up 3.6% year-on-year - May 3: 28,977.5 million travelers, down 1% from the previous day but up 7.5% year-on-year - May 4: 28,204.2 million travelers, down 2.7% from the previous day but up 12% year-on-year [28][29] Regional Travel Data - **Jiangsu Province**: 565.74 million visitors on the first day, with total spending of 2.095 billion yuan, representing year-on-year growth of 17.8% and 17.2% respectively [6][21] - **Hunan Province**: - May 1: 996.24 million visitors, up 31.4% year-on-year - May 2: 1,439.86 million visitors, up 33.88% year-on-year [7][24] - **Sichuan Province**: 518.94 million visitors and ticket revenue of 436.52 million yuan, with year-on-year growth of 21.17% and 19.04% respectively [7][23] Scenic Area Performance - **Xiangyuan Cultural Tourism**: 595,300 visitors and revenue of 38.72 million yuan, with year-on-year growth of 54.63% and 53.28% respectively [10][20] - **Emei Mountain**: Expected double-digit growth in visitor numbers during the holiday [10] - **Zhangjiajie**: Significant increases in visitor numbers, with core scenic areas seeing growth rates of over 29% [11][20] OTA and Hotel Data - **Ctrip**: Over 80% of accommodation orders during the holiday were for intercity travel, with a projected 20% of users opting for extended stays [13][25] - **Hotel Performance**: RevPAR increased by 11.5% year-on-year, with average daily rates (ADR) up by 6.4% and occupancy rates (OCC) up by 3.1 percentage points [16][17] International Travel Trends - **International Flight Bookings**: Increased by over 20%, with Chinese travelers visiting 1,303 cities globally, an increase of 290 cities compared to the previous year [27][42] Additional Important Insights - **Long-Distance Travel**: Significant growth in long-distance travel destinations, with orders for Haikou and Yining increasing by over 130% year-on-year [26] - **Peak Travel Days**: The highest travel volume is expected on the first two days of the holiday, with stable prices for domestic and international flights [15][28] This summary encapsulates the key insights from the conference call, highlighting the robust recovery and growth in the tourism sector during the May Day holiday period.