Citic Securities: The first shot of free education, it is expected that the following years of free education will continue to expand gradually.

CITIC Securities stated that on August 5th, the General Office of the State Council issued the "Opinions on Gradually Implementing Free Pre-school Education", which clearly states that from the autumn semester of 2025, the childcare and education fees for children in public kindergartens for the year before pre-school education will be waived. We believe that this opinion is a specific implementation of the Third Plenary Session of the Twentieth Central Committee and this year's government work report on "exploring the gradual expansion of free education" and also reflects the policy orientation of "putting people's livelihoods first" this year. Breaking down the policy details, it mainly includes expanding the coverage from "difficult groups" to "all children in kindergartens", a progressive upgrade for universal benefits, as well as a financial support mechanism with the central and local governments sharing responsibilities and dynamically adjusting expenditure. Under neutral assumptions, it is estimated that the free pre-school education policy may require an annual average of about 45 billion yuan in fiscal input, which may come from the rapid growth of central government funds for education expenses this year. It is expected that there will still be room for further expansion of free pre-school education in the following years.