China's A-shares have experienced a decade of consolidation. Under the synchronized monetary easing policies of China and the United States, it will face a triple impact of capital, policy, and fundamentals, initiating a new round of bull market with high cost-performance ratio. This article is derived from a piece by Metrics Ventures, organized and authored by PANews. (Background context: China calls for saving A-shares! Plans to inject hundreds of billions of RMB each year, but the market still worries about Trump's tariff threats) (Additional background: Has the bull market for China's A-shares arrived? The Shanghai Composite Index reaches a ten-year high, 'deposit migration' ignites investment enthusiasm) Dear esteemed readers: Previously, we have shared our views on BTC after its new highs regarding its new asset properties. At this moment, as the competitive landscape between China and the US undergoes dramatic changes, we believe it is necessary to share our views on RMB assets. Our core viewpoint is: We are about to enter the largest dual easing cycle in fiscal and monetary policy between China and the US since 2008. This easing's main line will be the synchronized recovery of the economies of China and the US and the most intense competition for monetary and international influence. Among them, RMB assets, especially A-share assets, will experience the triple impact of capital, policy, and fundamentals, with A-shares having undergone a decade of cleaning, possessing a similar cost-performance ratio to Bitcoin at $28,000. For a long time in the future, the main competition between China and the US will be the proportion of international currency use, which will also be a major theme of the future world. As of the date of this article's writing, the total market value of the RMB equity market (including H-shares) is approximately 120 trillion RMB, while the total market value of the US stock market is about 50 trillion USD. The size difference between the two may be less than everyone’s initial impression. However, compared to the total economic scale of China and the US (in terms of GDP, the US is about 1.5 times that of China), there is still a significant disparity. At this moment, we observe the following facts: From a political perspective, the US is fully turning towards pure populist right-wing policies, and its global strategy will further contract. The existing core influences of the US, such as NATO and the Asia-Pacific, will inevitably weaken further. The decline of US global influence can also be seen in the Middle East and the Russia-Ukraine war. The downward trend of the dollar's influence since the Iraq war may enter a new accelerated downward cycle, while domestic divisions and struggles have also entered a new state of turmoil; From a monetary perspective, during the continuous easing of the dollar alongside the US stock asset cycle, China has entered various deleveraging cycles since 2015, accumulating significant space for monetary and fiscal policies in the long term. The US debt issue is becoming increasingly prominent, having already become the most important asset issue for the next ten years. After going all-in on technological innovation, the short-term monetary and fiscal space in the US will gradually need to be exchanged for global influence; From a trend perspective, RMB assets have already welcomed significant bottom signals in net liquidity (represented by M2), fundamentals (represented by CPI and housing prices), and policy (political meetings since September) over the past two months. We believe that during this easing cycle, there are clear turning points in the aforementioned political, monetary, and fundamental aspects. The accumulated gap between China and the US equity assets and liquidity, which has built up for decades, may usher in a new trend of convergence. Increasing the exposure of the RMB system can enhance our company's ability to face external shocks and provide a margin of error for the vision of becoming a long-term family office for high-net-worth LPs. Our understanding and trading thoughts on the A-share market Understanding the A-share market and Chinese assets The A-share market is a typical purely RMB policy-driven market. Since 2015, it has undergone a continuous 10-year deleveraging and capacity clearing cycle, combined with the disconnection of foreign capital that began in 2018, which can be said to have gone through an extreme cleaning of a whole decade. China's economic growth rate has also started to accelerate since 2015. At this moment, we believe that the tremendous opportunities faced by A-shares or Chinese assets mainly stem from the following facts and inferences regarding policy, fundamentals, and capital: From a factual perspective, our understanding is: In terms of policy space, China's deficit rate (the ratio of fiscal deficit to GDP) has long followed the total amount and growth rate of GDP since 2008, maintaining a narrow deficit rate limit of 3%. This is far lower than the US (about 7%, with multiple years in recent years exceeding 10%) and Japan (around 6% annually, recently around 8%) and other major economies' deficit and debt pressures; From the economic fundamentals perspective, China possesses the world's only complete industrial production system and the cheapest, sound electricity systems and resources; From the capital aspect and positioning of A-shares, the capital market has long been in a politically marginal position, and the talk in September 2024 was the first time since coming to power that clear requirements were made for the capital market; From the perspective of national power development, China's military and global influence in near seas and near air compared to the other side has undergone tremendous changes since 10 years ago. The economic growth rate differences since 2015 and the trends in the China-US stock markets since 2022 ultimately stem from mismatches in monetary cycles. The core issue of China's short-term economy lies in the CPI deflation. From an inferential perspective, we believe under general assumptions: China can issue 50-200 trillion RMB in the next 10 years (simply considering the deficit rate approaching that of the US and Japan; in fact, recent statements from the Ministry of Finance have clearly indicated the intention to relax the narrow deficit rate); The governing capacity of the Chinese government can ensure at least 1-2 industry cycles occur in China; China's global influence will fluctuate upwards before a leap in agent hot wars/war forms, and the current two partial wars will accelerate this trend; The possibility of a direct hot war between China and the US in the medium term is almost zero. In the short term, the reversal of CPI has almost no chance of failure; the local government debt and real estate issues are not primary contradictions based on a) and b), and are easy to solve. China's social culture and people's characteristics (easy to inspire, eager for money) determine that establishing social confidence will not be difficult. In summary, we believe that before a hot war breaks out between China and the US, we will witness a synchronized leap in the economies of China and the US. Among them, the Chinese capital market faces a triple impact from policy, fundamentals, and capital, which is almost identical to the situation faced by Bitcoin in 2023, with the main difference being that the consolidation of A-share chips has undergone 10-15 years. The A-share market has currently completed the first liquidity repair at the index level, and the expected future trend will follow the economic operation rules, roughly as follows: commodities/high-end consumption -> industry trends/domestic unified market consumption -> industry trends. It is expected that the core capacity target space for each industry trend and sector market will be between 3-5 times, while the reversal/high growth target space will be around 10 times. From a principled standpoint, the current gap positions of the A-share index are 2889-2863 and 3017-3000 (taking the Shanghai Composite Index as an example). As of the date this report is issued, the Shanghai Composite Index is hovering around 3400 points. Related reports: Chinese A-share aunt calls for cryptocurrency: Bitcoin is digital gold, Ethereum is Web3 Nvidia, SOL is the blockchain gambling leader. Chinese university students launch Dogecoin and withdraw liquidity instantly = 4-year prison term! Be careful of entering the 'minefield' of the coin circle, or risk eating prison food. Who can become the technological foundation of China's stablecoin? Four 'national-level' public chains compete on the same stage. "Metrics Ventures: The China-US easing cycle stimulates the explosion of RMB assets, A-shares equal to Bitcoin at $28,000.

#BTC