A-Share Market

The core drivers of this round of the A-share market rally are Supply-Side Reform 2.0 and policies aimed at combating internal competition. During the first wave of Supply-Side Reform 1.0 in 2015, demand was stimulated through the monetization of shantytown renovation, while prices were raised by eliminating outdated production capacity. By applying pressure on both the supply and demand sides simultaneously, many of the issues at the time were resolved. The current approach to Supply-Side Reform 2.0 is essentially the same: on the supply side, we continue to cut overcapacity and raise prices, while on the demand side, we rely on policies such as large-scale infrastructure projects and childbirth subsidies to boost domestic demand. Between 2024 and 2025, a wide range of measures—including debt swaps, local government bond arrangements, fiscal and monetary policies, consumption stimulus, and industrial regulation—were employed, but the results were generally lackluster. The public isn’t swayed by empty promises; they only trust tangible infrastructure stimulus—things they can see and touch. On one hand, no one is willing to believe in abstract policy concepts; on the other, the economic rhetoric from top leaders is too obscure—it’s so dry it could put you to sleep—so naturally, acceptance is low. If they could speak as bluntly as Trump, the effectiveness of policy communication might be much better. ...

The Significance of the M1-M2 Spread In the June social financing data released in mid-July, the growth rate of M1 has already reached a clear inflection point and is rising rapidly. If M1 growth continues to outpace M2 in the coming months, forming what is known as the “golden spread,” it will essentially confirm that the liquidity environment is improving. In recent years, those bearish on China have constantly harped on the “liquidity trap” and “deflation”—this data directly contradicts their claims. ...