The flood of news over the weekend suggests that next week will be extraordinary.
1. First, there was good news that China and the US renewed the government scientific and technological cooperation agreement (this agreement has provided a framework for cooperation in technology, healthcare, environment, climate, and other fields since it first took effect in 1979).
What seems like an ordinary piece of news actually holds significant meaning—it indicates that there is still some consensus in areas of cooperation between the two sides, which could lay the foundation for dialogue and cooperation in other areas in the future. However, subsequent developments may only remain at a symbolic level, especially after Trump takes office.
2. Then there was news of US Treasury Secretary Yellen's exclusive interview with Reuters, where she mentioned China three times.
· The first time, it was mentioned that further sanctions against Russia (lowering the price cap on Russian oil) do not rule out the possibility of sanctioning Chinese banks.
· The second time, in response to the news that "China is considering depreciating the yuan." Yellen's response was that China's recent actions are quite the opposite, consistently pushing up the value of the yuan.
· The third time, warning Trump that maintaining open communication channels with China is very important.
Note: The last meeting of the China-US Financial Working Group will be held next week, focusing on financial stability issues, including tabletop simulations on how to respond to potential financial crises.
3. The Chinese Ministry of Finance, central bank, and securities regulatory commission have successively expressed their positions, seemingly hoping to guide market expectations. In terms of content, a reserve requirement ratio cut is something we might see soon, while other measures remain merely theoretical. China's recent expectation management seems overly focused on polishing wording, which is causing some investor fatigue.
· Ministry of Finance: Next year, a more proactive fiscal policy will be implemented to ensure that fiscal policy continues to exert force and is more effective (noting the wording 'more effective').
· Securities Regulatory Commission: Firmly implement important requirements to stabilize the real estate and stock markets, and effectively maintain the stability of the capital market (consistent with the Central Economic Work Conference, prioritizing the real estate market over the stock market).
· Wang Xin, director of the research bureau of the People's Bank of China, stated that monetary policy support should be appropriately increased, with timely cuts in reserve requirements and interest rates, and an increase in monetary credit supply (noting the wording 'appropriate' and 'timely').
It should be noted that due to market expectations that the Federal Reserve may signal a 'pause in interest rate cuts' next week, cautious sentiment may pervade the market as early as Monday. Will A-shares, US stocks, and gold experience a synchronized decline? Is the decline a buying opportunity or the beginning of a larger drop? There are deeper answers to this.
