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CNY rates remain steady on entering December with a steepening curve. The 2Y CGB yield has fallen from 1.45% in the last week of November to 1.41% yesterday, while the 10Y yield has risen from 1.80% to 1.86%. The long end should remain well supported in the near term.
First, the latest data prints are pointing to a relative improvement in growth momentum. The NBS Manufacturing PMI has edged up from 49.0 in October to 49.2 in December. Notably, the new export orders component has shown a more visible improvement alongside the China–US trade truce.
Second, the market is anticipating a more optimistic policy tone from the upcoming Central Economic Work Conference. Previously at the Fourth Plenum, Beijing has reaffirmed its aspiration to reach moderately developed status by 2035. This target implies an average real growth rate of around 4.5% per annum over the next decade. The growth target could be even more aggressive for 2026—the first year of the 15th Five-Year Plan.
Key policy directions are likely to include stronger consumption support through more forceful subsidies, increased job creation, and an improved social safety net. The growth engine is shifting toward “New Productive Forces” such as AI, robotics, and advanced manufacturing. Higher tech and energy investment is partly offsetting the shortfall from infrastructure and property investment.
That said, short-end rates are likely to remain anchored amid the ongoing anti-involution campaign. While industrial profits have improved on recent supply-side adjustments, the PBOC is likely to stay in easing mode until both CPI and PPI return to positive territory. Monetary accommodation remains necessary to contain developer and local government debt risks.
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