[Market feedback from Morgan Stanley’s press conference this morning]

Today’s NDRC press conference was significantly lower than expected. Although we have been emphasizing that fiscal policy cannot be a big move at the beginning, and we expect fiscal expenditure to be about 1-2 trillion yuan at the beginning, today’s press conference did not mention data, nor did it mention that the incremental scale in the next 2-3 months will not be large. There is no particularly strong inclination towards the direction of consumption and social security. This is not only lower than our conservative expectations, but also much lower than the market’s expectations of 5-10 trillion yuan stimulus. The specific reasons we believe are:

(1) After the decision-making level changed its thinking in mid-September, monetary policy and financial policy were the easiest to introduce, and this was done very quickly. We can regard it as the first arrow to reverse expectations and fight deflation.

(2) The second arrow mentioned by the Ministry of Finance and the NDRC as a combination was first mentioned by the NDRC. I think the intention today is to build and maintain market confidence, because we have learned that there is pressure in this regard within the system, but the people within the system also need to learn, and they cannot say everything the capital market wants to hear. Before, including after today’s press conference, we have received inquiries asking us to give feedback on the market’s feelings about the conference.

(3) The third arrow is to correct the current problems of law enforcement in other places, deep-sea fishing, retrospective investigation, and detaining entrepreneurs by setting examples, restore the confidence of entrepreneurs, and activate the PE and primary markets. We think this is worth looking forward to.

The press conference still mentioned that consumption is the top priority, but in addition to mentioning that the old-for-new policy for consumer goods will continue and that some targeted support will be given to the grassroots people, from the current scale, the old-for-new policy will increase from the current 150 billion to the future 300 billion. We think that this is it. The efforts to stimulate consumption and fight deflation are bound to be bumpy. However, expectations have not changed, because the decision-makers are deeply aware that if they do not fight deflation, their own fiscal revenue will also be affected, and local governments will find it difficult to continue. This is the real pain, and they will definitely find a way to do it.