Although the purchase of treasury bonds

[shapanwwuom]

In addition, China's 10-year treasury bond yield has continued to run at a low level below 1.7% recently, the negative interest rate gap between China and the United States has widened rapidly, and the exchange rate has also fluctuated at a low level. The central bank is currently facing dual constraints from the interest rate and exchange rate markets. To this end, the central bank announced on the 10th that it would suspend open market treasury bond purchases from January 2025.

However, this does not mean that liquidity will face tightening in the future. We also see some positive factors through last week's policies.

First, at the fourth quarter monetary policy meeting held by the central bank at the end of last year, it was proposed to "lower the reserve requirement ratio and interest rates when appropriate based on the domestic business owner data and international economic and financial situation and the operation of the financial market" to "maintain ample liquidity", while also "paying attention to changes in long-term yields" and "maintaining the basic stability of the RMB exchange rate at a reasonable equilibrium level."

Has been suspended at this stage, in order to release liquidity at a low cost and with higher efficiency, the probability of the central bank implementing a larger-scale reserve requirement ratio cut during the Spring Festival has greatly increased.

Secondly, the scope of subsidy policies has been expanded. Last week, the National Development and Reform Commission and the Ministry of Finance issued the "Notice on Stepping Up and Expanding the Implementation of Large-Scale Equipment Updates and Consumer Goods Trade-in Policies in 2025", expanding the range of products that can apply for subsidies in the automotive and home appliance fields, and adding the consumer electronics field with a larger market size.

This means that the expansion of the scale of fiscal subsidies should have a relatively good boosting effect on the growth rate of retail sales next year. According to institutional estimates, the scale of consumer goods subsidies in 2025 is expected to reach around 500 billion yuan.