Summary

李丰’s top-line read on China’s year-end macro picture is that there were “neither surprises nor shocks”: CPI rose as expected, or slightly above expectations; PPI barely met expectations but remained down year on year; and aggregate social financing and most other data broadly tracked expectations. The main source of incremental social financing has shifted from government bonds to corporate bonds, mostly short-term paper; the services PMI fell below 50, with real-estate-related services the main drag. Assuming no surprises in December, he only tentatively estimates nominal GDP growth at just above 4%; adding back roughly 0.4–0.5 percentage points of deflation could bring it to around 4.8%.
The sharp year-on-year drop in household short-term loans cannot be attributed entirely to weak consumption confidence: since October, an internet-assisted lending chain with roughly RMB5T in outstanding volume has simultaneously faced new rules on interest-rate caps and restrictions on rolling over the portion above the cap. Short-term lending improved month on month in November but remained weak year on year. The policy sequence is to first stop high-interest borrowing to repay old debt, then cushion the fallout through credit repair, and ultimately provide lower-cost consumer finance to reduce the all-in cost of consumption-related borrowing.
Beijing and Shanghai have produced an important but as-yet unverified combination of potential real-estate bottoming signals: transaction volumes have stopped shrinking, prices and newer resale homes have seen catch-up declines, and listings have also shifted. 李丰 likens it to a “high-volume decline” in the partial sense used in capital markets, similar to a phase experienced by Hong Kong’s mass-market housing sector in 2024. Real estate itself now accounts for just over 6% of GDP, and he doubts that another sharp decline would be easy “in principle.”
Household deposits continued to grow in November, but deposits at non-bank financial institutions did not see high growth, so the data alone do not suggest a large-scale shift of household deposits into capital markets; some may have moved into bank wealth-management products.
Exports were the clearest upside surprise of the year: the goods-trade surplus exceeded $1T for the first time during the year in the first 11 months, while the US share of China’s exports by direct destination has fallen below 9%. 李丰’s structural explanation is that broad machinery and electrical products account for roughly 60% of exports, while services exports have risen from more than RMB3T last year to close to or above RMB4T, with high-tech and high-value-added segments gaining share. Even as the RMB strengthened from roughly 7.2–7.3 at the start of the year to around 7.05, the surplus continued to expand, suggesting that exports have become more resilient to exchange-rate shocks.
李丰 suspects that even if the RMB remains under appreciation pressure, it may not easily break below 7 for at least part of next year. His core judgment is that “maintaining expectations of RMB appreciation without delivering it immediately” is more supportive of trade, energy transactions, and willingness to hold RMB in dual-currency settlement; once 7 breaks, the market could quickly price 6.9, 6.8, or even 6.5, while purchasing-power parity of roughly RMB4 to the dollar can only “serve as a talking point.”
The second half of this year may become a historical reference point for US retrenchment and the shift in the relative positions of China and the US. The new national security strategy has been characterized as leaning toward “Monroe Doctrine” thinking, with greater focus on the Western Hemisphere and less direct military involvement elsewhere. 李翔 believes that, alongside this round of tariff negotiations, China is beginning to be treated more like a “relatively equal competitor.” The “Trump trade” has fallen sharply over the past two months, which 李丰 thinks may reflect support falling to around half the electorate and a renewed reassessment of his domestic policymaking capacity and influence.
The key reading of the Russia-Ukraine “28 points” on the program is that territory and elections can be negotiated, but reconstruction and economic interests cannot. 李丰 believes the ceasefire process will take longer than previously expected, while Russia has already secured control of Donetsk and other areas. On Trump calling China first and Japan the following day, 李翔 speculates that the US may want China to influence Russia, while China may have told the US that Japan’s related remarks crossed a red line. Both stressed that this portion was only informal conversation and speculation.
This was a year in which equities outperformed expectations, property slightly underperformed, consumption remained weak, and exports beat expectations; year-end trading has now shifted toward rebalancing between high and low valuations. Broadcom and Oracle saw substantial pullbacks over the previous two days, while Nvidia pulled back modestly; the S&P 500 remained relatively stable as Nasdaq volatility increased. With expectations of a Japanese rate hike and year-end profit realization added to the mix, capital is taking profits in high-valuation AI names, holding cash, and considering reallocation. China’s policy response is seeking to absorb incremental capital by lowering insurers’ risk factors for equity assets and supporting innovative drugs and financial-asset allocation; consumption remains the final piece that is “just missing a little momentum to get moving.”

Deep dive

1. Year-End Data Bring No Surprises, and Policy Is Likely Entering Its Closing Phase

李丰’s summary is that CPI rose as expected or slightly above expectations, PPI barely met expectations but remained down year on year, and the overall picture was “neither notably good nor notably bad.”
The services PMI fell below 50, one of the few weak points of the year; disaggregation shows that real estate and related services were a major contributor to the sector’s October decline.
The main contributor to incremental aggregate social financing has shifted from government bonds earlier in the year to corporate bonds, primarily short-term corporate bonds; both household long- and short-term loans remain weak.
Assuming no macro surprises in December, 李丰 believes there will probably be no major new policies before year-end. He only tentatively estimates nominal GDP growth at just above 4%; adding back roughly 0.4–0.5 percentage points of deflation could bring it to around 4.8%, using 4.3% or 4.4% plus 0.5 percentage points as examples.
Household deposits continued to grow in November, but deposits at non-bank financial institutions did not see high growth. On this data alone, household deposits have not shifted substantially into capital markets; some may have moved into bank wealth-management products.

2. The First Cause of the Collapse in Household Short-Term Lending: A RMB5T Assisted-Lending Chain Was Rewritten

Household short-term loans improved month on month in November but deteriorated sharply year on year. 李丰 believes confidence and consumption demand played a role, but the abrupt change in internet-assisted lending regulation since October explains “a large part” of the move.
Industry participants have revised the scale of assisted lending, including major platforms, to roughly RMB5T. New rules have lowered interest-rate caps and restricted the rollover of amounts above the cap, directly affecting a range of revolving loans and borrowing to repay old debt.
Measures for personal-credit repair, including no longer publicly disclosing some small-value credit problems, address what happens to borrowers after high-interest refinancing is cut off. Together, they represent a simultaneous adjustment of both the regulatory floor and ceiling.
李丰 links the latest consumption-support policies into 3 steps: stop excessive interest rates, cushion the resulting credit problems, and then promote relatively low-interest consumer loans. The remaining challenge is how banks can reach, assess, and willingly serve people who previously had access only to high-cost funding.

3. Beijing and Shanghai May Be Showing “High-Volume Decline” Bottoming Signals

Household long-term loans grew only slightly in November, directly reflecting the weakness of the property market from October to November. But in Beijing and Shanghai, transaction volumes did not continue shrinking as expected despite the absence of fresh policy stimulus.
Prices have been falling alongside stable transaction volumes: newer resale homes that had previously held up better have now seen catch-up declines, while 李丰 observed that Shanghai transaction volumes may have expanded both year on year and month on month. He borrowed capital-markets language to describe this as a “high-volume decline” in the partial sense.
Listings have also changed. In the past, sellers would quickly increase listings after prices fell for 1–2 months; this time, the changes in transaction volumes, prices, and listings have been viewed by some observers as part of a bottoming process. 李丰 presented this only as a personal observation, not a firm judgment.
李丰 uses Hong Kong as a reference: after losing policy support in 2024, Hong Kong went through a sharp decline, with mass-market housing experiencing a similar phase before recovering through 2025 on multiple economic factors. He stressed that he does not buy or sell property and that this was an “observation with no conflict of interest whatsoever.”

4. Real Estate Has Fallen to Just Over 6% of GDP; Rates and Rent-to-Price Ratios May Converge

Real estate itself now accounts for just over 6% of GDP; including renovation, furniture, home improvements, and upstream and downstream sectors, it has traditionally been summarized as roughly 20%. 李丰’s instinct is that for an economy this large, housing falling to an extremely low share “doesn’t sound very reasonable.”
This also fits the pair’s earlier description of having reached “the halfway point”: old industries have fallen by nearly half, new industries have filled part of the gap, and the two are offsetting each other to produce medium- to low-speed growth with limited incremental expansion.
李翔 relayed a proposal to reduce mortgage rates to zero, which 李丰 rejected outright: “How would you expect banks to survive?” Zero rates could also raise future lending risks. A more plausible tool would be to lower commercial mortgage rates further through interest subsidies on property loans.
The rent-to-price ratio in major cities is around 2%, while commercial mortgage rates remain around 3%; if home prices fall for another quarter and subsidies are introduced, the two could converge. Based on the historical relationship over the year or so after the stock market began stabilizing, property may not turn until after the second quarter of next year.

5. A $1T Surplus Shows Exports Moving Beyond a Single US Market

November imports and exports grew above expectations, and the goods-trade surplus exceeded $1T for the first time during the year in the first 11 months. 李丰 called this the first time in history that any country’s cumulative trade surplus had exceeded that level within a calendar year.
Just as important as the headline figure, the US share of China’s exports by direct destination has fallen below 9%, to just over 8%; exports to the EU have risen significantly, while ASEAN remains an important destination.
李翔’s view is that global trade patterns are being reset: China can no longer treat the US as its most important market as it once did, while other economies are simultaneously recalibrating their relationships with the US, China, and one another.
Asked whether stronger-than-expected exports suggested globalization was not as damaged as imagined, 李丰 said the restructuring of global supply chains was showing up in China through active or forced adjustments in the total volume and structure of exports, rather than through simple disappearance.

6. Higher-Value-Added Exports Have Increased the RMB’s Capacity to Absorb Appreciation

李丰’s broad estimate is that full-year exports were around RMB25T last year, while the first 11 months of this year have already approached that level. Full-year exports could reach RMB26T–27T, up roughly 5%–6% from last year.
Broad machinery and electrical products—including machinery, electronics, consumer electronics, and related industrial chains—now account for roughly 60% of exports, forming the most important structural base of the surplus.
Services exports have risen from more than RMB3T last year to close to or above RMB4T, accounting for roughly 15%–20% of total exports. Beyond transport and tourism, growth includes pharmaceutical R&D, software and information services, and design; 李丰 speculates that short-form dramas and online literature may also be included.
Even as the RMB strengthened from roughly 7.2–7.3 at the start of the year to around 7.05, the surplus continued to expand. 李丰’s explanation is that exports are no longer highly dependent on price, and higher value added has strengthened companies’ ability to absorb currency-appreciation shocks.

7. RMB Internationalization Needs Appreciation Expectations, Not an Immediate Break Below 7

Faced with investment banks’ appreciation targets of 6.5, 6.7, 6.8, and 6.9, 李丰 suspects the RMB may not easily break below 7 for at least part of next year, because once that level breaks, the currency could theoretically continue rising until the appreciation expectations are fully realized.
His key line was: “Maintain expectations of RMB appreciation, but don’t deliver it immediately.” Potential upside would encourage trading partners to hold RMB in local-currency, dual-currency, and energy settlements; for internationalization, that may be more valuable than realizing the appreciation in a single move.
Asked about a fair exchange rate, 李丰 said he had no firm view, only purchasing-power parity: roughly RMB4 to the dollar, perhaps somewhere between RMB3 and RMB4.3. But that figure can “only serve as a talking point,” because the dollar also embodies circulation, liquidity, ease of exchange, and market demand.

8. The Next Stage of Going Overseas Is Not Selling More Goods, but Relocating Supply Chains and Technology

A $1T surplus will also intensify pressure on trading partners: if China’s manufacturing efficiency continues improving, the question of “what exactly can other countries still produce and sell?” will become sharper.
李翔 suggested that Chinese companies may shift from simply selling goods to producing locally, moving supply chains, factories, equipment, and some technology to Europe, ASEAN, and Africa. Drawing on observations from portfolio companies, 李丰 said this localization would be partly voluntary and partly forced.
The pair compared it with the global expansion of Japanese companies after 1992: pushed by an overvalued yen and US restrictions, Japan established a “global production and supply-chain system” in Southeast Asia. Chinese factories today could become local benchmarks for automation, production lines, management, training, and technology.

9. The “Trump Trade” Decline Reflects a Discount for Domestic Execution Capacity

Over the past two months, “Trump concept stocks” tied to Trump himself, his family, media platforms, oil, and related policies have fallen significantly. 李丰’s initial explanation is that domestic support has fallen to a historic low, close to half.
李翔 did not summarize this as Trump having “messed things up,” instead distinguishing performative impact from real-world impact: policies such as tariffs have made things happen, but whether they achieve their stated objectives and reshape supply chains remains to be seen.
李丰 reduces the trading question to political capacity: the market may be marking down Trump’s ability to push through and execute policy inside and outside the party, while also pricing uncertainty over whether tariffs could be overturned by the Supreme Court.
Using Jared Diamond’s framework from Upheaval, the pair also discussed algorithm-reinforced echo chambers, social polarization, and parties using redistricting to marginalize opponents; these institutional frictions will feed into the midterm elections and policy execution.

10. US Retrenchment May Make the Second Half of This Year a Historical Turning Point

The national security strategy’s positioning of China has shifted, and the pair characterized it as leaning toward a “Monroe Doctrine”: the US is focusing more on the Western Hemisphere, cooperating more with allies such as Europe, and reducing direct military involvement elsewhere.
李峰 believes the strategy could become a landmark when future historians look back on US retrenchment, because it may mark a major inflection in the contraction of American power.
李翔 sees this round of tariff negotiations as another marker: compared with 2018, the two countries’ leverage and negotiating positions have changed, and China is beginning to be viewed as “a relatively more equal counterpart, or what you might call an opponent.”
The difficulty with macro changes is that flagging them in advance sounds alarmist, while after they unfold gradually they seem inevitable. The pair therefore placed the national security strategy, tariff negotiations, and the second half of this year within a single possible historical trajectory.

11. The 2001 Misalignment Reminder: True Turning Points Are Often Visible Only in Hindsight

李峰 recalled that in a column after 9/11, Thomas Friedman wrote that the most visible event at the time was the terrorist attack, but that in retrospect the more important change at the beginning of the century might be China’s rise. Twenty-five years later, people have a clearer sense that this shift had been unfolding all along.
China’s accession to the WTO and 9/11 occurred almost simultaneously. The US, at the height of its power and confidence, suffered an attack on its own soil and shifted strategic attention toward the Middle East and terrorism, while China continued integrating into the global trading system.
李峰 believes the Clinton administration’s choice reflected the American mindset of the 1990s: after emerging from the oil crisis, winning the Cold War, reshaping the global order, and advancing financial globalization, the US had reason to believe that the same model would ultimately transform China.
The pair joked that the US might have needed to ban The End of History, while Japan might have needed to ban Japan as Number One, illustrating the victors’ confidence in their own model and temporary advantage.

12. The “28 Points” Put Values on the Table and Keep Interests Behind the Red Line

李丰 first revised his earlier expectation: the process of ending the Russia-Ukraine war “should be much more delayed, or much later and slower, than what we discussed before.” In his view, Russia has already secured control of Donetsk and other areas, leaving the initiative more with Moscow.
Under the program’s interpretation of the “28 points,” Ukrainian territory and new elections can be negotiated, but Russia’s economic reconstruction, Ukraine’s reconstruction, and the related interests cannot.
When Europe approved the use of frozen Russian assets to aid Ukraine, the US initially opposed it. 李丰’s explanation is that the money was originally meant for reconstruction, while the US also hoped to capture half of the profits; redirecting it to military aid would mean touching its expected interests.
Borrowing a Kissinger-style contrast, he summarized it this way: “The US cannot compromise on interests, but values-related issues can be negotiated; China cannot compromise on red lines, but interests can be negotiated.” In his view, the “28 points” are very Trump-like.

13. The Japan Dispute Was Seen as a Test of China’s Regional Red Lines

After the “28 points” were advanced, Trump called China, then called Japan the next morning. 李翔 speculates that the US may have wanted China to influence Russia, while China may have explained that Japan’s related remarks crossed a red line. Neither call was disclosed in detail, and both speakers made clear that this was only informal speculation.
李翔 took the scenario further: assuming the US would not use force to intervene in issues around China, if China could make a major country such as Japan publicly retract its remarks, apologize, or even bear consequences through a change in leadership, it would create a “benchmark effect” showing that the relevant red lines cannot be crossed.
李翔 also mentioned claims surfaced by his algorithm about “Jiutian” drones carrying roughly 200 drones and vertically terminal-stage hypersonic anti-ship missiles, while repeatedly stating that he was not a military expert and would not make technical judgments. His real interest was how such conventional-deterrence assumptions might alter the long-term political calculations of Japan and Taiwan.

14. Global Capital Is Rotating Away from AI Highs Toward Valuation Rebalancing

Hong Kong stocks became volatile after a sharp rally, and the move cannot be explained by China’s fundamentals alone; external liquidity, especially expectations of a possible Japanese rate hike, may have amplified the adjustment.
Signals have already emerged in AI: Broadcom and Oracle saw substantial pullbacks over the previous two days, while Nvidia also pulled back modestly. In the US, the S&P 500 was relatively resilient as Nasdaq volatility rose sharply.
李丰 sees this as the previously discussed “rebalancing between high and low”: capital is taking profits in high-valuation AI assets and rotating toward relatively undervalued categories. Risk appetite will still fall initially, as investors worry about “having stepped in at the top.”
Year-end mechanics reinforce the move: funds need to record performance, close their books, prepare for redemptions and bonuses, and manage liquidity. They therefore take profits first and hold cash before setting new strategies and rebalancing in the new year.

15. Insurer Capital Is a Clear Incremental Source; Consumption Still Lacks the Final Push

Biopharma has received repeated policy support, including bringing innovative drugs into commercial insurance coverage and encouraging insurers to invest in innovative drugs. Large financial sectors, selected industrial products, and biomedicine have also received funding or policy catalysts.
The more direct variable is that risk factors for several categories of insurers’ equity holdings have been lowered. One category is unrelated to stocks, while the other 2 are equity-linked. This means that even without growth in total insurance assets, the share allocable to the relevant equity assets will rise.
By 李丰’s rough recollection, insurers allocated around RMB4T to capital markets the previous year, versus more than RMB5T this year. Lower risk factors combined with premium growth could create a new source of equity-market inflows.
Consumption is the only part of the structure where “there has been plenty of policy, but it is still just missing a little momentum to get moving.” If data and sentiment receive a catalyst, more balanced economic growth and more balanced capital-market allocation could materialize together—and the capital market would usually move first.

16. This Year’s Asset Scorecard Diverged, While Primary Markets Followed the Secondary-Market Recovery

The pair’s year-end assessment is that A-shares and Hong Kong stocks beat expectations, property slightly missed, consumption and lending were weak but had not been expected to be strong, and exports clearly exceeded expectations. Overall, there were no major areas of substantial underperformance.
For secondary-market investors, this was a good, even very good, year. As long as portfolios were not extremely concentrated, even a broadly diversified allocation had a strong chance of approaching the index average gain. US equities rose a little over 10% for the year, below some emerging markets, though the result still depended on portfolio construction.
Last year was more difficult by comparison: expectations shifted from anticipating improvement at the beginning of the year to believing conditions would worsen, and only after policy suddenly strengthened in the fourth quarter did outcomes exceed the already very low bar—while creating a high base for this year’s fourth quarter.
Primary-market activity also exceeded expectations, but was driven mainly by the wealth effect from the secondary market; historically, it tends to lag by around 6 months. 李丰 used Shenzhen as a micro example: the more globalized AI hardware becomes, the more Shenzhen benefits. Team travel to Shenzhen and the on-the-ground sense of local foot traffic are both improving, even though Guangdong’s overall GDP is still lagging the broader economy.

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