The main research points of Citic sec are as follows:

The Central Economic Work Conference is typically held in mid-December, and we expect that the conference will continue a positive stance on macro policies for next year.

Based on our review of the scheduling of the Central Economic Work Conference from 2015 to 2023, it is usually held in mid-December. The package of incremental policies and a series of positive statements from the policy level since the end of September have greatly boosted expectations, which not only helps achieve this year's economic growth targets but also provides a relatively optimistic guidance for the market's expectations for next year. Although traditionally, the Central Economic Work Conference does not announce specific targets such as economic growth rate and deficit ratio, we believe that this year's conference will still maintain a positive stance on enhancing counter-cyclical adjustments. The economic growth target for next year is expected to remain around 5%, with a corresponding expectation that the deficit ratio may rise to 4%; the quota for special treasury bonds may be 3 trillion yuan, of which 1 trillion yuan is to replenish the capital of commercial banks, while 2 trillion yuan may be used for national major project investments and consumer subsidies; finally, the scale of new special bonds may exceed 4 trillion yuan.

Specifically, we determine that subsequent policies are likely to propose new requirements and make new deployments in the following areas:

Debt remediation: The news conference of the Standing Committee of the National People's Congress on November 8 has already clarified the repayment schedule and funding sources for hidden debts before 2028; subsequent focus will be on accelerating the delegation and issuance of special bond quotas for replacement. Although the essence of debt remediation is to prevent risks, we believe that it clearly reflects a shift in policy thinking this round, similar to the transition from 'de-leveraging' to 'stabilizing leverage' in 2018-2019. The impacts of debt remediation are expected to include: first, reducing the funding pressure on the government for principal and interest repayment, estimated to save 600 billion yuan in interest expenses over 5 years; second, promoting local governments to better focus on livelihood protection, with a rough estimate that the current shortfall in 'three protections' spending may be about 1.6 trillion yuan; third, accelerating the repayment of corporate debts, based on the data on government-related receivables published by listed companies, we roughly estimate that the total scale of government debts for all industries of listed companies may be around 4 trillion yuan.

Real estate: Under the goal of stabilizing and stopping the decline, policies are still in a concentrated period of introduction and implementation, including urban village renovations, acquisition of restricted land, and relaxation of demand-side policies. Among these, '1 million new urban village renovations and dilapidated housing renovations' are expected to gradually take root and drive investments in the next two years, and by monetizing relocation, improve residents' willingness to undergo renovations; it is suggested to pay attention to whether the subsequent scale will further expand. Furthermore, the core logic for promoting the stabilization of the real estate market is still aimed at achieving a relatively balanced supply-demand situation. Specifically, on the supply side, it is expected that there will be increased acquisition of existing houses for social housing and support for local governments to recover eligible idle land; on the demand side, it is expected that the reduction of provident fund and mortgage loan interest rates, as well as the gradual relaxation of purchase restrictions in high-tier cities, will steadily release housing purchase demand.

Consumer: the exchange of old for new continues to expand, and the service sector broadens supply. Consumption is the key to expanding domestic demand next year. On one hand, it is expected that the support for consumer spending through ultra-long special treasury bonds may improve from the current level of 100-150 billion this year to 200-300 billion yuan, potentially including consumer electronics in the policy support range. On the other hand, documents promoting the high-quality development of service consumption have been issued, where short-term attention should be paid to the further expansion of the visa-free 'circle of friends', and long-term attention to building a new service system for cultural tourism, retirement, and childcare from the supply side.

Technology and industrial policy: may involve industrial upgrading, independent control, and private enterprise participation. Over the past five years, the Central Economic Work Conference has mentioned technological innovation and industrial development every year, particularly emphasizing that in 2020 and 2023, technological innovation was the top task outlined for the following year's economic work. Considering that the highest decision-making level's attention to technological innovation remains unchanged since 2024, it is expected that the Central Economic Work Conference's expressions regarding technology will focus on: first, promoting the upgrading of traditional industries and the development of xinxingchanye under the requirement to develop new productive forces according to local conditions; second, focusing on overcoming critical links choked by overseas forces and achieving high-level self-reliance in technology; third, implementing the two 'unwavering' principles and fully leveraging the initiative and creativity of private enterprises.

Capital market reform: the importance of the capital markets has significantly increased this year, and policies are expected to continue to be introduced and implemented to guide expectations and instill confidence. First, the formal version of the 'market cap management guidelines' has been launched, combined with the two major monetary tools of the central bank, further strengthening dividend distribution and increase stake & buy back efforts, promoting listed companies to enhance investment value and strengthen investor returns is anticipated. Second, there will be an increase in guiding patient funds into the market; currently, there remains considerable room for the proportion of insurance funds' stock holdings and etf.index fundsScale still has considerable room for improvement. Third, there will be further encouragement for listed companies to engage in high-quality restructuring in the direction of new productive forces and industrial integration.MergerRestructuring.

State-owned enterprise reform: MergerRestructuring to become a central state-owned enterprise is an important path to enhance core competitiveness. First, do well in addition, or establish a new central enterprise group to assume strategic missions, promote professional integration, and improve operational efficiency; second, dare to subtract, or focus on core responsibilities and businesses, promote asset transfers, and do well in 'exiting'; third, skillfully multiply, or actively layout new quality productivity; fourth, know how to divide, or break through the bottleneck of the primary market, leveraging patient capital to support high-quality industrial investments.

Investment strategy:

Global geopolitical situation has deteriorated beyond expectations; China's macroeconomic recovery is slowing; developed economies are experiencing a greater-than-expected downturn; domestic macroeconomic policies are falling short of expectations; reform progress is not meeting expectations.

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