Zhongjin: DeepSeek's breakthrough is one of the triggering factors for the market to reassess China's innovation capabilities.

CICC pointed out that, under the new geopolitical situation, some new trends are emerging in the dual circulation model with internal circulation as the main focus and mutual promotion of internal and external circulation. In terms of internal circulation, the real economy has seen improvements in supply while demand remains weak, but the stock market has significantly risen, mainly due to a decrease in risk premium. The deleveraging in the second half of the financial cycle has brought about excess savings, and the funds are tilting towards risk assets driven by market expectations of improvement. On the other hand, recent data shows the initial signs of a new closed-loop pattern in external circulation, where in the past, China exported consumer goods to the US and corresponding external assets were held in US Treasury bonds; the new trend is for China to export capital and intermediate goods to emerging markets and countries along the Belt and Road Initiative for local investments, with corresponding external assets formed through bank loans, overseas investments by companies, etc. The increase in tariffs by the US in 2025 is accelerating this change. The two key points to promoting mutual promotion of internal and external circulation are innovative development and boosting domestic demand, in order to fully leverage China's economies of scale. The breakthrough of DeepSeek is one of the triggering factors for the market to reassess China's innovation capabilities, boosting investors' risk appetite.