Source: Chuan Yue Global Macro Author: Tao Chuan Zhao Honghe Wu Bin Zhang Xinnan If the June 28th debate took place in 2020, the White House might still not have changed hands. Overall, the content of the debate itself is no longer so important. What is more eye-catching is the age issue behind Biden's "disastrous" on-site performance - as the oldest president in US history (81 years old this year), can Biden still handle the job of president for the next four years? Market's answer is NO. From overseas perspective, based on real-time data, the famous website PredictIt calculates that after the debate, Biden's probability of winning the election dropped from 47% the previous day to 33%, the lowest in nearly a year, while Trump's chances of winning increased to 59%. So can it be assumed that Trump is a sure winner? We believe that there are still many variables in the US election this year, and the key lies in the fact that the timing of this year's first round of debates is much earlier than in previous years, before both parties have confirmed their candidates. Looking ahead, the Democratic Party's strategy may mainly have two paths: One is to continue to promote Biden's candidacy. The key is expectation difference. Whether intentional or unintentional, the first round of debate has lowered market expectations to the bottom, and then counterattacks in the second round of debate. This is similar to the 2016 presidential election, in which Trump turned the tide against Hillary Clinton in the third round of debates. Second, Biden may drop out and choose new candidates. The key is to select suitable candidates and unify the party's support and opinions in the short term. The sequence of Vice President Harris in this list is undoubtedly among the top. Based on this, the new candidate still has the possibility to turn the tide in the second round of debates in September. In terms of the content of the debate itself, both candidates were rather restrained. Trump was clearly more "mature and savvy", and both sides seemed to have a tacit understanding not to play the "China card" too much. Most of the content of this debate, both sides' policy positions, were actually already well known in the market before. A one-and-a-half-hour debate focused more on energy and on-the-spot response. In this regard, after the baptism of 2016 and 2020, Trump was clearly more calm and at ease, and did not mention China too much, possibly due to the fact that the two parties' attitudes towards China are not very different in the current environment. In other areas: On the economic front, Biden pointed out that the economy was in chaos when Trump stepped down, and that Trump’s proposed tariff increases pushed up prices. He emphasized his contribution to creating employment opportunities and promised to reduce inflation. Trump, on the other hand, criticized the inflation caused by Biden was "completely destroying us." Job growth is a result of the post-epidemic rebound. He himself saved the US steel industry through tariffs. On the abortion issue, Trump still supports returning abortion rights to the states, while Biden said he would veto national anti-abortion laws. Trump's position of "leaving it to each state to decide" is like saying that civil rights should be returned to each state. On immigration, Trump said that Biden's opening of the border has caused violent crime in the United States, and claimed to be the person with the "widest heart" on stage. Biden criticized Trump's immigration policy for causing family separation. On the geopolitical front, Biden expressed support for a Gaza ceasefire, while Trump accused Biden of triggering the geopolitical conflict. On a personal level, in terms of Trump's crimes, Trump said he "did nothing wrong" but was convicted of being "manipulated," and insisted that there was fraud in the 2020 election. Biden said Trump was a "complainer" who couldn't accept failure. But it must be admitted that this debate is a real blow to Biden's candidacy, especially among swing voters. Recently, due to reasons such as reduced inflation and easing of geopolitical conflicts, Biden's approval rating has been catching up with Trump, especially in swing states where the gap has narrowed. However, in this debate, Biden's old age was exposed, and Trump has disciplined and sharply criticized Biden's economic and immigration policies, accusing him of causing violent crime in the United States and the Russia-Ukraine conflict. Looking at the basic situation, black and Latin American, young people, and high-income groups are more supportive of Biden, while whites, middle-aged and elderly groups, and low-income groups tend to support Trump. After this debate, Biden may face the loss of support among some black people, high-income groups, and young people. Although his abortion policy is more in line with women's interests, the priority of the abortion issue may be weaken when women consider voting. Follow-up attention: In addition to the sentencing results of Trump's "hush money case" on July 11, the Democratic National Convention will be held on August 19-22, with the possibility of replacing the Democratic presidential candidate, and the second presidential debate on September 10 will be the Democratic Party's last chance to counterattack.
Authors: Tao Chuan, Shao Xiang, Zhang Yunjie, Zhong Yumei.
Original Title: "Government Work Report: What New Changes? (Citizen's Livelihood Macro Tao Chuan Team)"

How to respond to the new changes in the "increasingly complex and severe" external environment? This may be the core issue of today's government work report - against the backdrop of insufficient effective demand, trade and technology will face greater shocks, necessitating further policy increases:

Policy efforts need to be early and sufficient: The report particularly emphasizes that policies should be activated in advance, and it should "give full support at the right opportunity". Considering the flexibility of policies in recent years, if it is not enough, further policy increases may follow.

Technology needs to "accelerate": Compared to last year's Central Economic Work Conference, there is a stronger emphasis on "accelerating the construction of a modern industrial system". Emerging and future industries have become the key to breaking through global competition; just like last year, educating the nation through science and technology, and innovation leading development have also been placed in a very important position.

Foreign trade and foreign investment need to be more "proactive": Under growing external pressures, in foreign trade, one aspect is to support the diversification of foreign trade, while the other is to improve export and domestic sales channels; the highlights in foreign investment include expanding comprehensive openness in services such as Internet, telecommunications, Medical, and Education.

Boosting Consumer spending is 'already planned' and will be implemented at the right time: in addition to the 300 billion ultra-long-term special national bonds supporting trade-ins, what may be even more important are the Other sufficient policy reserves, such as mechanisms to enhance Consumer capacity (income) and the expansion of services in health, Retirement, childcare, and household services.

Specifically, there are five major signals in the government work report worth noting:

Total policy: responding to uncertainties with countermeasures. When tariffs encounter the Two Sessions, in the face of frequent tariff increases from the U.S., the government work report states that 'policies must be implemented as soon as possible, better early than late, to seize time amid various uncertainties, and when the moment is right, be decisive,' indicating that this time China is more confident in facing external uncertainties, with more policy reserves.

Consumer: a major 'contingency plan' for responding to challenges. This year's government work report mentions 'Consumer' significantly more often. Mechanisms such as 'normal wage growth for workers,' 'parenting subsidies,' and 'diversified service supply in health, Retirement, childcare, and household services' are also being improved, indicating that this 'contingency plan' for Consumer spending is ready. As economic downward pressure increases, Consumer spending will be introduced at the opportune moment.

Industry: the 'content' of Technology is marginally increasing. Although 'new-type productivity' still ranks second in priority, the emphasis has shifted to 'accelerate,' indicating that the recent focus is on Technology. In addition to continuing to emphasize areas such as AI+, commercial aerospace, and low-altitude economy, embodied intelligence, 6G, Smart Phones and computers, and Siasun Robot&Automation also need to solidify and accelerate development.

In addition, similar to last year, the important boost for 'new-type productivity' via 'Educating the nation through science and technology' (talent elements) is listed as the third item in the work order, establishing a support system for 'Education-Research-Talent' under 'Educating the nation through science and technology.'

MMF: continuing the tone of 'moderately loose' and under the call to 'seize time amid uncertainties,' a reduction in reserve requirements may soon be realized.

First, external 'uncertainties' represented by tariffs are imminent, and tools such as reduction in reserve requirements may soon have an appropriate opportunity to be implemented.

Secondly, recent domestic interest rates and Exchange Rates risks have eased somewhat, especially as the previously "rushed" government bond rates have generally retreated, once again leaving room for monetary easing.

Thirdly, the coordination and cooperation between fiscal and monetary policies is a key link in effectively implementing policy "combinations," and since the beginning of the year, the pressure from government debt supply has increased significantly. We expect that the monetary policy may reach a "move" moment, with total operations represented by reserve requirement ratio cuts likely to be implemented first.

Fiscal: Welcoming three major "breakthroughs." By 2025, the scale of government debt in China will officially enter the "13 trillion+" era, demonstrating the maximum "sincerity" of fiscal efforts in the new year, accompanied by three major highlights:

The first "breakthrough" is setting the deficit rate at 4%, which not only breaks the highest record of deficit rates in China's fiscal history, with the 3% deficit rate's invisible constraint no longer in effect, but also represents the largest increase in deficit rate targets over the years.

The second "breakthrough" is that as the purposes of newly issued special bonds expand to debt settlement, land reserves, etc., the quota for newly issued special bonds has for the first time exceeded 4 trillion yuan. However, if we exclude the 0.8 trillion yuan for debt settlement, this year's newly issued special bond quota has decreased by 0.3 trillion yuan compared to last year.

The third "breakthrough" is that special treasury bonds made their debut in two forms for the first time: one type is the ultra-long-term special treasury bonds (1.3 trillion yuan) for "dual heavyweight" and "dual new" purposes; the other type is special treasury bonds (0.5 trillion yuan) for the capital supplementation of large state-owned commercial banks.

Editor/Somer