中国外汇与利率监测- 人民币走强，收益率曲线趋陡-China FX_Rates Monitor_ Stronger CNY, Steeper Curve

Summary of Key Points from the Conference Call Industry Overview - The report focuses on the China FX and rates markets, tracking developments in foreign exchange and interest rates, including valuations, policy stance, technicals, flows, and fundamentals [4][5][34]. Core Insights and Arguments 1. Economic Growth Forecast: China's economy is projected to achieve approximately 5% year-on-year growth in 2025, with a forecast of 4.8% for 2026, surpassing the market consensus of 4.5%. This outlook is based on strong exports and fiscal easing estimated at 1.2 percentage points of GDP [4][5]. 2. Policy Easing Approach: The People's Bank of China (PBOC) is expected to adopt a cautious approach, focusing on medium-term growth rather than short-term cyclical issues. A lower growth target range of 4.5-5% may indicate a higher tolerance for growth slowdown and reduced willingness for policy easing [4][5]. 3. CNY Exchange Rate Dynamics: The USD/CNY spot rate fell below 7.0 by the end of 2025, driven by broad USD weakness and year-end FX settlement demand. A gradual appreciation of CNY is anticipated, although a sharp appreciation could negatively impact exporters' profitability [4][5]. 4. Interest Rate Cuts: The PBOC is expected to implement two 10 basis points cuts in the policy rate in 2026, reducing the 7-day OMO rate to 1.2% by the end of the year. This is part of a strategy to facilitate government bond issuance and manage liquidity [5][34]. 5. Long-term CGB Yields: Increased supply of long-term Chinese government bonds (CGBs) due to fiscal easing may lead to upward pressure on long-term yields, although weaker domestic demand could pose downside risks [5][34]. 6. Trade Balance Improvement: China's trade balance has improved, with a significant increase in the goods trade surplus. Travel exports reached about 200% of 2019 levels, while travel imports were around 97% of 2019 levels as of November 2025 [39][42]. Additional Important Insights 1. Liquidity Management: The PBOC has been active in liquidity management through open market operations (OMO) and repo transactions, with net liquidity injections noted in December [76][81]. 2. Bond Issuance Trends: Net issuance of central government bonds was approximately RMB 335 billion in December 2025, with local government bond issuance also showing significant activity [85][88]. 3. Foreign Investor Activity: Foreign investors continued to sell negotiable certificates of deposit (NCDs) in November, indicating a cautious stance towards the Chinese bond market [116]. 4. Market Expectations: Rising market expectations for a reserve requirement ratio (RRR) cut around the Lunar New Year holiday suggest a proactive approach to stimulate credit extension to major projects [5][34]. This summary encapsulates the key points from the conference call, highlighting the economic outlook, policy strategies, and market dynamics relevant to the China FX and rates markets.