YCC CAPITAL Emerging Markets & China Strategy June 30, 2026 Executive Summary At first glance, China’s latest consumption figures appear disappointing. Retail sales contracted 0.6% year-over-year in May, reinforcing the widespread perception that household demand remains weak. Yet beneath the headline lies a more nuanced picture. After adjusting for last year’s exceptionally high comparison base—driven by aggressive government subsidy programs—and temporary weather disruptions that weighed on offline consumption, sequential momentum actually improved meaningfully. The more important question, however, is not whether consumption stabilized in May. It is whether the recovery can endure. Our assessment remains cautious. The recent improvement owes much to modest gains in employment, but the composition of that employment has shifted dramatically toward flexible and gig-based work. While these jobs reduce measured unemployment, they often provide lower incomes, fewer benefits, and considerably less financial security. As a result, China’s labor market is becoming quantitatively stronger while qualitatively weaker. Anyone who has watched a city fill with food delivery riders during difficult economic times has seen this phenomenon firsthand. Streets appear busier and more people are working, yet many households remain reluctant to spend because income certainty has deteriorated. Employment exists—but confidence does not. From YCC Capital’s perspective, this structural shift represents one of the most underappreciated constraints on China’s domestic demand outlook. Until stable employment opportunities expand meaningfully, consumer confidence is unlikely to experience a sustained recovery regardless of cyclical policy stimulus. YCC Perspective Financial markets often celebrate improving unemployment statistics as evidence that economic momentum is returning. History suggests investors should instead ask a more important question: what kinds of jobs are being created? Employment quality frequently matters more than employment quantity. China today increasingly resembles other economies that experienced rapid growth in gig employment following periods of structural slowdown. Headline labor statistics improve, yet wage growth remains subdued and precautionary savings continue rising. That distinction will likely determine whether China’s long-awaited consumer recovery finally materializes—or remains another false dawn. Consumption Is Improving at the Margin—but the Foundation Remains Fragile Headline retail sales slowed to -0.6% year-over-year in May, seemingly indicating further deterioration in domestic demand. However, this figure deserves careful interpretation. Last year’s nationwide consumer subsidy programs created unusually high comparison effects, particularly for household appliances and durable goods. In addition, unusually heavy rainfall disrupted brick-and-mortar consumption across several regions during May. Sequential data therefore paint a considerably less pessimistic picture. Month-over-month retail activity outperformed historical seasonal averages and represented a noticeable improvement from April, suggesting consumer spending has begun to stabilize rather than deteriorate further. Nevertheless, stabilization should not be mistaken for recovery. Household confidence remains exceptionally sensitive to labor market conditions, property wealth, and future income expectations. While policymakers have succeeded in slowing the pace of deterioration, they have yet to generate convincing evidence of a self-sustaining consumption cycle. Employment Is Improving—But the Wrong Kind of Employment Labor market conditions continued to improve during May, with the surveyed unemployment rate declining once again. Historical evidence demonstrates a meaningful inverse relationship between unemployment and household consumption propensity. Empirical analysis suggests that every 0.1 percentage point decline in unemployment has historically lifted household consumption willingness by roughly 0.8 percentage points. Viewed narrowly, falling unemployment should therefore support stronger consumption. Yet the composition of China’s labor market tells a more complicated story. Over recent years, unemployment trends have increasingly diverged between local residents and migrant workers. While unemployment among migrant workers has declined, unemployment among locally registered residents has remained comparatively elevated. This divergence reflects one of China’s most important structural labor market transformations: the rapid expansion of flexible employment. Migrant workers have generally demonstrated greater willingness to participate in gig economy positions—including delivery services, ride-sharing, logistics, and platform-based work—whereas local residents continue to prioritize employment stability and traditional salaried positions. Recent housing provident fund enrollment data from Chongqing provide additional confirmation of this trend, showing a steadily rising proportion of flexible workers entering the formal contribution system. The implication is significant. May’s employment improvement appears to have been driven disproportionately by growth in flexible employment rather than expansion of stable, higher-quality jobs. That distinction matters enormously for the broader economy. Why Flexible Employment Limits Consumption Flexible employment carries two structural consequences that directly constrain household spending. First, income levels are generally lower. Gig workers often receive variable compensation based on completed tasks rather than fixed salaries. Their earnings fluctuate considerably across seasons and economic cycles, reducing aggregate wage growth even as total employment rises. Second, income uncertainty encourages precautionary savings. Households facing uncertain future earnings naturally become more conservative. Rather than increasing discretionary purchases, they prioritize liquidity and emergency savings. The phenomenon is hardly unique to China. Across numerous advanced economies, workers with unstable income streams consistently exhibit higher savings rates and lower discretionary consumption than households enjoying stable salaried employment. China appears to be following the same pattern. The country’s household consumption propensity has remained systematically subdued throughout 2024-2026 despite numerous policy initiatives designed to stimulate domestic demand. In our view, labor market quality provides a compelling explanation for this disconnect. Consumers do not spend confidently simply because they are employed. They spend confidently because they believe they will remain employed. Flexible Employment Cannot Become the Economy’s Final Demand An important macroeconomic limitation often receives insufficient attention. Flexible employment ultimately depends on demand generated elsewhere in the economy. Delivery platforms require consumers to place orders. Ride-hailing drivers require passengers. Freelancers require corporate clients. Platform economies cannot indefinitely create demand for themselves. Without continued expansion of stable middle-income employment, flexible employment eventually reaches diminishing returns. Current data already suggest this process may be emerging. Local resident unemployment remained near its highest seasonal level in recent years during May. Meanwhile, improvements among migrant workers may become increasingly difficult to sustain if underlying domestic demand remains weak. Recent official discussions addressing excessive competition within China’s consumer service industries further reinforce this concern. Intensifying price competition often reflects insufficient aggregate demand rather than excessive supply alone. For investors, this represents an important warning signal. Labor market stabilization

YCC CAPITAL Emerging Markets & China Strategy June 28, 2026 Executive Summary There is a familiar temptation whenever property markets weaken: investors instinctively assume that sustainable economic recovery cannot begin until housing prices stabilize. International evidence suggests the opposite is often true. Drawing on nearly six decades of data across 57 economies and 190 housing downturns, our analysis indicates that economies frequently recover well before real estate markets do. GDP typically reaches its trough approximately two years after housing prices begin falling, while residential property prices often continue declining for another three to four years. In other words, economic expansion and property recovery become partially decoupled. This phenomenon—which we describe as “de-real-estate growth”—marks one of the most important structural transitions modern economies undergo after a property boom ends. Growth no longer relies primarily on expanding mortgage credit, residential construction, or housing-related consumption. Instead, new drivers gradually emerge: stronger exports, resilient service-sector demand, manufacturing investment, infrastructure spending, and productivity-enhancing capital expenditure. History repeatedly demonstrates that economies do not simply replace one growth engine with another overnight. The adjustment resembles changing engines on an aircraft already in flight. The process is uncomfortable, uneven, and politically difficult, yet entirely possible. China today increasingly exhibits many of these characteristics. While its housing correction has not yet reached the severity observed in historical “deep contraction” episodes internationally, the composition of growth has already shifted meaningfully. Exports, manufacturing investment, infrastructure, and service consumption have become progressively larger contributors to economic activity, while the property sector’s influence continues to diminish. This transition should not be mistaken for a return to the old investment cycle. Rather, it represents a fundamental restructuring of China’s economic model. The economy may continue expanding, but not because real estate has recovered. Instead, it is learning—perhaps reluctantly—to grow without it. The Historical Pattern: GDP Recovers Before Housing One of the most consistent findings across international property cycles is the surprisingly large gap between macroeconomic stabilization and housing market stabilization. Across 48 episodes classified as severe real estate contractions, GDP generally bottoms around eight quarters after house prices begin declining. Property prices, however, do not typically reach their trough until approximately 22 quarters, or roughly five and a half years, into the downturn. The implication is profound. Economic recovery does not require housing prices to recover first. Instead, fiscal stimulus, monetary easing, export competitiveness and private-sector adaptation allow broader economic activity to stabilize while real estate continues working through excess supply, leverage and balance-sheet repair. This distinction matters enormously because investors frequently anchor their outlooks on housing indicators while overlooking improvements elsewhere in the economy. The data suggest this approach systematically underestimates the resilience of broader economic systems. One might compare it to recovering from an injury. A patient may begin walking long before the broken bone appears fully healed on an X-ray. The visible wound lingers even as underlying functionality steadily improves. The same principle frequently applies to national economies. Three Stages of De-Real-Estate Growth International experience suggests that post-property adjustments evolve through three distinct phases. Stage One: The Initial Shock The first two years are dominated by deteriorating housing activity. Falling home prices suppress residential construction, reduce household wealth, weaken confidence and slow consumption. Housing investment contracts first before weakness gradually spreads through the broader economy. During this period GDP growth typically deteriorates rapidly. Policy responses remain relatively limited initially as authorities assess whether the slowdown represents a temporary correction or a broader structural adjustment. Stage Two: Policy-Led Stabilization Around the second year, the economy generally reaches its cyclical low. Recovery begins—but it is largely policy-driven. Governments expand fiscal deficits aggressively while central banks lower interest rates to cushion private-sector deleveraging. Across international cases, fiscal deficits increased from an average of only 0.4% of GDP at the onset of housing weakness to nearly 5% of GDP roughly four years later. Meanwhile policy interest rates declined dramatically, falling from approximately 11.1% to 6.3% over the same period. This combination of easier monetary policy and expansionary fiscal support creates sufficient demand to stabilize employment and prevent deeper recessions. Yet growth during this phase remains fragile because it depends heavily on government intervention rather than private-sector momentum. Stage Three: Self-Sustaining Expansion The final stage begins roughly five years into the housing downturn. Interestingly, governments often begin reducing policy support just as economic momentum strengthens. Fiscal deficits gradually narrow. Interest-rate cuts slow or stop altogether. Despite less policy assistance, GDP continues improving. This represents the most encouraging phase because private demand increasingly replaces public stimulus. Businesses begin investing again, consumers regain confidence, exports strengthen, and the economy develops new engines of expansion independent of housing. The transition from policy dependence to market-led growth marks the true completion of de-real-estate growth. Why Housing Rarely Regains Its Former Dominance One of the most misunderstood aspects of housing cycles is what happens after recovery. Property prices may eventually stabilize. Housing construction may partially recover. Yet housing almost never regains its previous share of national output. International evidence shows residential investment averaged roughly 6.7% of GDP at its historical peak before severe contractions. Even ten years after housing prices began falling, residential investment typically recovered only to approximately 4.2% of GDP. The pattern is remarkably persistent. Consumer behavior follows a similar trajectory. Durable goods consumption—closely linked to home purchases, renovations and furnishing—also recovers only partially. Even after property markets stabilize, consumers rarely resume the same level of housing-related spending seen during previous booms. This reflects more than cyclical weakness. It reflects structural change. Once economies diversify toward services, technology, manufacturing and exports, they seldom return to relying primarily on residential property as their principal growth engine. History therefore argues against expecting China to recreate the property-driven expansion model that characterized the previous two decades. Three Engines That Replace Property If housing no longer leads growth, what does? International experience consistently identifies three major replacement engines. Export Rebalancing The first engine is external demand. During housing booms, domestic consumption and imports typically surge, compressing net exports. As housing weakens, imports

YCC CAPITAL Emerging Markets & China Strategy June 25, 2026 Executive Summary China’s January–May 2026 fiscal data reveal a government sector undergoing an important transition. After front-loading support earlier in the year, fiscal authorities appear to be moving into a temporary consolidation phase before a likely reacceleration in the second half. The key message is straightforward: fiscal revenues are recovering faster than expenditures. Government income has stabilized on the back of stronger industrial profitability, firmer producer prices, and more active capital markets. Meanwhile, spending growth has slowed considerably, suggesting policymakers are preserving ammunition for deployment later in the year. This pattern resembles a household that has already purchased the materials for a major renovation project but has not yet fully begun construction. The cash is available, the plans are largely approved, but the labor and execution phase has been deferred. For investors, the most important implication is that China’s fiscal impulse has not disappeared. Rather, it appears to have shifted into a later timetable. The combination of ultra-long special treasury bond issuance, special local government bond deployment, and policy-bank financing suggests fiscal support could strengthen during the third quarter. At the same time, structural constraints remain significant. Persistent weakness in land sales revenues continues to weigh on local government finances, highlighting the ongoing challenges facing China’s property sector and local fiscal architecture. From YCC Capital’s perspective, the data reinforce a broader theme: China continues to rely increasingly on state-led investment and fiscal engineering to offset structural weakness in private-sector demand and real estate. While cyclical stabilization is achievable, durable growth remains constrained by deeper balance-sheet pressures within households, developers, and local governments. Fiscal Revenue: Signs of Stabilization and Recovery Broad Fiscal Revenue Continues to Improve During January–May 2026, national general public budget revenue reached RMB 1.005 trillion, representing year-over-year growth of 4.0%. This marked an improvement from the January–April pace and signals a gradual recovery in government income generation. May alone generated fiscal revenue growth of 6.6% year-over-year, demonstrating continued momentum. Several factors supported this improvement: Better industrial profitability Higher producer price inflation Stronger manufacturing activity Increased activity in financial markets Improved tax collection dynamics Combined tax and non-tax revenues are now contributing to fiscal recovery, a notable improvement from earlier periods when tax receipts carried most of the burden. Tax Revenue Recovery Broadens Tax revenue totaled RMB 826.2 billion during the first five months of the year, increasing 4.4% year-over-year. The composition of this improvement offers valuable insight into the state of the economy. Value-Added Tax Remains Supportive Domestic VAT rose 6.2% year-over-year during January–May. In May alone, VAT increased 7.9%. Because VAT is closely tied to production and sales activity, the improvement suggests manufacturing conditions remain relatively resilient despite ongoing weakness in parts of the domestic economy. Producer prices also provided support. Higher industrial prices help expand taxable revenue bases even when real economic activity remains only moderately strong. Consumption Taxes Reflect Softer Consumer Demand Not all areas were equally positive. Domestic consumption tax revenue declined 3.1% year-over-year during the first five months. May consumption tax receipts fell 2.0% after previously recording positive growth. This slowdown is consistent with softer discretionary spending patterns, particularly in automobiles and consumer durables. The data reinforce a recurring theme in China’s economy: manufacturing activity has often outperformed household consumption, creating an increasingly unbalanced growth profile. Financial Markets Become an Important Revenue Source One of the strongest components of fiscal revenue came from capital markets. Stamp tax revenue increased 35.8% year-over-year. Even more striking, securities transaction stamp tax revenue surged 88.8% cumulatively and 145.9% in May alone. For fiscal authorities, active equity markets have become an increasingly important supplementary source of revenue. This dynamic illustrates an important feature of China’s policy framework. Healthy financial market activity not only supports investor confidence but also directly contributes to government revenue generation. Property-Related Taxes Remain Weak Despite some marginal improvement, real-estate-related taxes continue to reflect significant underlying weakness. During January–May: Deed tax revenue declined 14.8% Land value-added tax revenue declined 14.2% Although the pace of decline narrowed compared with previous months, the property sector remains a substantial drag on fiscal conditions. This is particularly important because land transactions have historically served as one of the most important funding channels for local governments. The gradual stabilization observed in recent months should not be mistaken for a recovery. Rather, it appears more consistent with a bottoming process characterized by low transaction volumes and cautious market sentiment. Corporate Profitability Shows Improvement One encouraging development emerged from corporate income taxes. Corporate income tax revenue turned positive on a cumulative basis for the first time this year, rising 0.2%. Monthly growth reached 3.3%. This improvement likely reflects: Stronger upstream commodity pricing Better profitability among advanced manufacturing industries Improved prepayments associated with recovering industrial profits However, the recovery remains uneven. Profit growth continues to be concentrated in select industries, while many traditional sectors face ongoing margin pressure. As a result, the sustainability of corporate tax improvement remains uncertain. Fiscal Expenditures: Deliberate Pause Before Potential Reacceleration Spending Growth Slows Significantly On the expenditure side, the picture differs considerably. National general public budget expenditures reached RMB 1.139 trillion during January–May, increasing only 0.8% year-over-year. This represented a further slowdown from earlier months. In May alone, spending fell 1.6% year-over-year, marking a second consecutive monthly contraction. The data suggest policymakers deliberately moderated fiscal deployment after strong first-quarter activity. Rather than continuously accelerating spending, authorities appear to be smoothing fiscal support over the course of the year. Central Government Supports Growth While Local Governments Lag The divergence between central and local government spending remains striking. In May: Central government expenditures rose 11.3% Local government expenditures fell 4.4% This gap reflects a broader structural reality. While Beijing maintains considerable fiscal flexibility, local governments remain constrained by: Weak land sales Elevated debt burdens Reduced financing capacity Slower property market activity The result is an increasingly centralized fiscal system in which the national government assumes a larger role in stabilization efforts. Spending Priorities Favor Technology and Social Welfare

YCC CAPITAL Emerging Markets & China Strategy ──────────────────────────────────────── June 23, 2026 Executive Summary China’s May 2026 fiscal data tells a familiar story: headline revenues are improving, yet underlying economic momentum remains fragile. Tax receipts strengthened, government revenues exceeded recent seasonal norms, and fiscal income quality improved as a larger share came from taxes rather than administrative or non-tax sources. However, beneath the surface, fiscal spending remained restrained, infrastructure-related expenditures continued to weaken, land-sale revenues deteriorated further, and special-purpose bond issuance lost momentum during the second quarter. For investors, the key takeaway is that China’s fiscal position is not constrained by a lack of funds as much as by a lack of effective transmission. Fiscal resources exist, but conversion into tangible economic activity remains slow. Much like a reservoir that appears full while irrigation channels remain clogged, capital is accumulating within the system without generating the growth impulse policymakers seek. From YCC Capital’s perspective, May’s data reinforces a broader theme that has defined China’s post-property-boom era: stabilization is possible, but sustainable acceleration remains elusive. Fiscal authorities are generating better revenues, yet the economy continues to struggle with weak private-sector confidence, sluggish property activity, and insufficient domestic demand. Sources: Bloomberg, YCC Capital (Based on China Ministry of Finance data discussed in the underlying report.) YCC Perspective Walking through many Chinese cities today reveals a striking contrast. Shopping malls remain crowded on weekends, restaurants are busy during holidays, and stock-market activity has recovered from previous lows. Yet conversations with business owners often tell a different story. Customers are more price-sensitive, investment decisions are postponed, and hiring remains cautious. China’s fiscal data reflects exactly this contradiction. Revenue collection has improved because industrial prices have stabilized and financial market activity has picked up. Yet spending, particularly spending that creates new economic activity, remains restrained. Revenue growth alone cannot generate stronger demand if government funds are not reaching projects, households, and businesses at a faster pace. The result is an economy that appears healthier on paper than it feels on the ground. Fiscal Revenue Improves as Tax Quality Strengthens Revenue Growth Remains Elevated China’s general public budget revenue increased 6.6% year-over-year in May, remaining near the strongest pace recorded so far this year. During the first five months of 2026, total fiscal revenue rose 4.0% year-over-year, with roughly 45.5% of the annual budget target already completed, a pace ahead of recent years. Importantly, the composition of revenue improved. Tax revenues rose 6.8% year-over-year in May, while cumulative tax revenue growth accelerated to 4.4%. Non-tax revenues grew 5.6%, with cumulative growth reaching 2.2%. Compared with the first quarter, a larger proportion of government income originated from traditional tax sources, indicating healthier revenue generation rather than dependence on one-off administrative measures. This matters because investors often focus solely on headline revenue growth. In reality, the source of revenue is equally important. Tax-driven growth generally reflects genuine economic activity, whereas non-tax revenues can often be temporary or policy-driven. In May, the “tax content” of fiscal revenue improved meaningfully. VAT and Financial Market Activity Drive Revenue Gains Two tax categories were responsible for most of the improvement: Value-Added Tax (VAT) Domestic VAT revenue increased 7.9% year-over-year in May, with cumulative growth rising to 6.2%. Improving industrial prices and earlier recovery in manufacturing production supported nominal sales and expanded the tax base. The improvement is particularly noteworthy because China has spent much of the past several years fighting industrial deflation. Even a modest recovery in upstream commodity and industrial prices can generate significant benefits for fiscal collections. Stamp Duties Stamp-duty revenue surged 109.8% year-over-year, while securities transaction stamp duties jumped 145.9%. Cumulative securities-related stamp duty growth reached nearly 89%, reflecting substantially stronger trading activity across China’s equity markets. The rebound aligns with elevated turnover across the Shanghai and Shenzhen exchanges during May. For policymakers, stronger stock-market activity serves multiple purposes. It boosts confidence, supports household wealth perceptions, and directly contributes to fiscal revenues. Consumption Taxes Signal Continuing Weakness Not all tax categories painted a positive picture. Consumption-tax revenue declined during May, consistent with weakness in automobile purchases and other large-ticket discretionary spending categories. Retail sales data during the same period similarly suggested that end-user demand remains subdued. This remains one of the central challenges facing China’s economy. While industrial production can be supported through policy initiatives and export demand, durable improvement ultimately requires stronger household consumption. The persistence of weak consumption-tax collections suggests Chinese households remain cautious despite numerous policy support measures. From a macro perspective, consumers continue to save more and spend less than policymakers would prefer. Spending Remains Restrained Despite Revenue Recovery Fiscal Expenditure Growth Remains Weak General public budget expenditures fell 1.6% year-over-year in May, although this represented an improvement from April’s 3.2% decline. Cumulative expenditure growth during January–May slowed to 0.8%, while only 37.95% of the annual spending budget had been executed. In other words, revenues are running ahead of schedule while spending remains behind schedule. This divergence is one of the most important messages within the May data release. Fiscal Pressure Concentrated at the Local Level The spending slowdown is largely a local-government phenomenon. Central government expenditures increased 11.3% year-over-year, while local-government spending declined 4.4%. This distinction matters because local governments are responsible for much of China’s infrastructure investment, public services, and economic implementation. Over the past decade, local governments served as China’s primary growth engine whenever economic momentum weakened. Today, however, they face significantly tighter financial conditions due to the prolonged property downturn and shrinking land-sale revenues. As a result, even when Beijing wishes to stimulate growth, implementation increasingly encounters local fiscal constraints. Social Spending Holds Up While Infrastructure Weakens Social Expenditures Continue to Provide Support China continues prioritizing social stability and household welfare. Combined expenditures on: Social security and employment Healthcare Education rose approximately 2.4% year-over-year in May. Cumulative growth remained a relatively healthy 4.7%, with social-security spending increasing 6.3% and healthcare spending increasing 11.3%. These figures reflect Beijing’s increasing emphasis on what policymakers call “investing in people” rather than relying exclusively on

YCC CAPITAL Emerging Markets & China Strategy Date: June 23, 2026 YCC Perspective A useful way to think about China’s housing market today is to imagine a city emerging from a long winter. The first signs of spring do not appear everywhere at once. The sunny hilltops thaw first, while the shaded valleys remain frozen. China’s property market is displaying a similar pattern. After several years of deep correction, the market is no longer moving as a single asset class. Instead, a pronounced bifurcation has emerged. On one end, low-priced, high-yield apartments are stabilizing as affordability improves. On the other, luxury properties in technology-driven cities are finding support from wealth effects tied to AI and capital markets. Between these two poles sits the broad middle market, which remains under pressure. The key question for investors is whether these divergences represent the beginning of a sustainable recovery or merely a temporary fragmentation within a still-challenging macro environment. Executive Summary China’s housing market is undergoing two important structural splits: A divergence between “Top-Tier” assets, “Bottom-Tier” assets, and the middle market Small, affordable apartments have been the first segment to stabilize. Luxury housing in technology-oriented cities such as Shenzhen has also begun recovering. Mid-market properties continue to face weak demand. A divergence between transaction prices and listing prices Listing prices continue to decline modestly. Actual transaction prices have largely stabilized and, in many cities, have begun recovering. The broader implication is that China’s property market may have entered a bottoming process rather than continuing a uniform decline. However, recovery remains highly uneven and heavily dependent on policy support, household confidence, and the ability of new economic sectors to offset weakness in traditional industries. The First Divergence: Luxury and Distressed Assets Outperform the Middle Market Affordable Housing Leads the Recovery The earliest stabilization has occurred in small apartments with low total purchase prices. These units generally offer: Higher rental yields Lower entry costs Stronger owner-occupier demand Less dependence on speculative investment After years of price declines, much of the financial speculation embedded in these assets has already been eliminated. What remains is housing’s consumption value—people buying homes because they need a place to live. In practical terms, many young families and first-time buyers are increasingly prioritizing affordability over prestige. Instead of stretching for larger apartments through leverage, buyers are choosing smaller homes and reducing mortgage exposure. This behavioral shift is becoming one of the defining characteristics of China’s post-bubble housing market. Luxury Housing Benefits from the AI Economy At the opposite end of the market, large luxury properties are also beginning to stabilize, particularly in cities with strong exposure to technology industries. Shenzhen stands out as the clearest example. Unlike affordable housing, luxury properties do not benefit from attractive rental yields. Their recovery is being driven by two different forces: 1. Falling Real Interest Rates for Technology Wealth The report highlights a growing divergence between AI-related industries and the broader economy. While much of China’s traditional industrial base continues to face pricing pressure, AI-linked sectors are experiencing strong growth. This creates a form of localized inflation among technology workers, entrepreneurs, and investors. As incomes and asset values rise within these sectors, the effective real cost of borrowing falls, making high-end property purchases more attractive. 2. Wealth Effects from Capital Markets Strong performance in technology-related equities and AI-linked businesses has supported income growth among a relatively small segment of the population. The beneficiaries include: Technology professionals Financial industry employees Entrepreneurs Equity holders This wealth effect is concentrated rather than broad-based, which explains why luxury housing recovery remains limited to a handful of cities rather than becoming a nationwide phenomenon. Why the Middle Market Is Struggling The recovery of low-end and high-end housing highlights a weakness in the middle segment. Households remain cautious toward leverage. Even when buyers maintain similar down payments, many are reducing mortgage sizes and purchasing cheaper homes than they would have considered previously. This means demand that once supported mid-priced properties is increasingly migrating toward lower-priced units. In effect, China’s housing recovery is not yet being driven by renewed confidence. It is being driven by selective affordability and selective wealth creation. That distinction matters. The Second Divergence: Transaction Prices vs. Listing Prices One of the most important developments is the growing gap between asking prices and actual transaction prices. Many observers continue focusing on listing prices, which remain under pressure. However, transaction prices tell a different story. According to the report: National transaction prices stabilized in April. Stabilization continued in May. An increasing number of cities have recorded positive month-over-month transaction price growth. Why This Matters Housing bottoms rarely occur when sellers become optimistic. They occur when distressed inventory gets absorbed. The current market appears to be experiencing exactly this process. Throughout early 2026, transaction volumes increased enough to gradually remove the most attractively priced inventory from the market. As these discounted properties disappear: Listing prices may continue falling. Negotiations may remain aggressive. Yet actual executed prices can still rise because buyers are purchasing increasingly higher-quality inventory. This dynamic is consistent with many historical housing recoveries globally. Transaction prices tend to bottom before public sentiment improves. Shenzhen: The Most Important Housing Market Signal Among China’s major cities, Shenzhen appears to be advancing furthest through the stabilization process. The report uses a leading indicator called the “up-down ratio,” which compares the number of communities raising asking prices versus those lowering them. Drawing comparisons with Hong Kong’s recent housing recovery: A ratio around 0.6 suggests a bottoming phase. Around 0.7 suggests stabilization. Above 0.8 suggests entry into a recovery phase. Shenzhen has approached the 0.8 threshold, placing it closest to a potential transition toward sustained recovery. Shanghai has also improved but appears less advanced. Beijing and Guangzhou remain in the earlier stages of stabilization. Lessons from Hong Kong The report draws extensive comparisons between mainland China and Hong Kong. Many conditions that preceded Hong Kong’s housing rebound are already present in mainland China: Deep price corrections Relaxation of housing restrictions Improving rental markets

YCC CAPITAL Emerging Markets & China Strategy June 23, 2026 Executive Summary China’s May economic data painted a picture of an economy becoming increasingly bifurcated. On the surface, headline growth metrics remain respectable, supported by strong exports and resilient industrial production. Beneath that surface, however, domestic demand continues to deteriorate. Investment contracted further, retail sales slipped into negative territory, and the property downturn remains firmly entrenched. The result is an economy increasingly dependent on external demand and policy-supported industrial activity while household confidence, private-sector investment, and real estate remain significant drags. From YCC Capital’s perspective, the most important takeaway is not that China is slowing dramatically, but that growth quality continues to weaken. The economy is generating output, yet struggling to generate sustainable domestic demand. Factories remain busy, but consumers remain cautious. Exporters are expanding, while households continue to retrench. The contrast increasingly resembles a household whose salary is still growing but whose spending keeps shrinking. The income statement looks healthy, but the underlying confidence is fading. China’s policy makers still possess considerable fiscal and monetary tools. However, unless policies succeed in restoring confidence among households and private businesses, cyclical stimulus alone is unlikely to generate a durable reacceleration. Key Themes Export growth remains exceptionally strong. Industrial production is benefiting from external demand and technology sectors. Fixed asset investment has deteriorated significantly. Consumer spending has turned negative. Real estate remains the largest structural drag on growth. Additional policy easing is likely if external demand weakens later this year. Source: Bloomberg, YCC Capital. The Big Picture: Two Economies Inside One China The dominant feature of China’s economy today is divergence. One economy is connected to global trade, advanced manufacturing, artificial intelligence infrastructure, semiconductors, and export-oriented production. This economy continues to perform relatively well. The other economy consists of households, property developers, local businesses, and private investors. This economy remains under considerable pressure. May data highlighted this divide more clearly than at any point this year. Two trends stand out: 1. External Strength vs. Domestic Weakness Exports accelerated sharply. Export growth surged from 14.1% in April to 19.4% in May, providing significant support to manufacturing activity and industrial production. At the same time: Fixed asset investment fell further into negative territory. Consumer spending contracted. Property activity remained deeply depressed. 2. Supply Strength vs. Demand Weakness Production accelerated while demand weakened. Factories continued to produce goods at a healthy pace, supported by exports and technology investment. Yet consumers and businesses showed little willingness to spend. This imbalance has become one of the defining characteristics of China’s post-pandemic economy. Source: Bloomberg, YCC Capital. Industrial Production: Exports Continue to Carry the Economy China’s industrial production rose 4.5% year-over-year in May, exceeding expectations and improving from April’s 4.1%. While the headline number appears encouraging, the drivers reveal a more nuanced story. Export Demand Remains the Primary Engine Industrial export deliveries increased 10.1% year-over-year in May. This marked the second consecutive month of double-digit growth. Global demand for Chinese manufactured goods has remained remarkably resilient despite geopolitical tensions and ongoing trade frictions. For many manufacturers, foreign customers continue to provide stronger demand than domestic buyers. Technology Manufacturing Accelerates High-tech manufacturing expanded 15.1% year-over-year, accelerating by 2.3 percentage points from April. Several factors are contributing: Global AI investment spending. Rising semiconductor exports. Domestic data center construction. Continued state support for strategic industries. China’s technology manufacturing complex remains one of the few areas enjoying simultaneous policy support, strong investment, and robust demand. Traditional Sectors Remain Mixed Performance varied across industries: Stronger sectors General equipment manufacturing Specialized equipment manufacturing Automobile production Weaker sectors Non-metallic minerals Certain commodity-processing industries Construction-linked sectors These patterns further reinforce the divergence between newer growth industries and traditional sectors tied to property development. Source: Bloomberg, YCC Capital. Fixed Asset Investment: A Significant Deterioration Perhaps the most concerning development in the May data was the continued collapse in investment activity. Urban fixed asset investment fell 4.1% year-over-year during the first five months of 2026. This represented a substantial deterioration from the previous reading of -1.6%. Private-sector investment declined 7.1%. Private investment often serves as one of the clearest indicators of business confidence. The continued decline suggests firms remain hesitant to commit capital despite government efforts to support growth. Source: Bloomberg, YCC Capital. Infrastructure Spending Loses Momentum Infrastructure investment growth slowed to just 0.6%. On a monthly basis, infrastructure investment is estimated to have contracted nearly 10%. Several factors contributed: Reduced urgency after a strong first quarter. Slower fiscal expenditure growth. Lower issuance of local government special bonds. Policy makers adopting a more patient stance amid strong exports. This appears more like a deliberate policy pause than a loss of capacity. China’s government retains significant control over infrastructure spending. As a result, infrastructure remains one of the most likely channels for future stimulus if growth weakens further. Looking ahead, YCC Capital expects infrastructure activity to improve during the second half of 2026 as projects associated with national strategic development plans accelerate. Source: Bloomberg, YCC Capital. Manufacturing Investment Turns Negative Manufacturing investment declined 0.4% year-over-year during January-May. This represents a meaningful shift from positive growth earlier in the year. Several forces appear to be at work. Rising Input Costs Producer prices have accelerated, particularly in upstream commodity sectors. Higher costs are causing many firms to delay expansion plans and reassess investment budgets. Capacity Rationalization Ongoing efforts to address excessive competition and industrial overcapacity are beginning to weigh on investment decisions. For example, automobile manufacturing investment declined 2.7%. AI and Technology Remain Bright Spots Not all manufacturing sectors are weakening. Investment linked to: AI infrastructure Semiconductors Advanced manufacturing Data centers continues to expand rapidly. In many respects, China is increasingly becoming a tale of two manufacturing sectors: traditional industries facing profitability pressure and advanced industries benefiting from structural policy support. Source: Bloomberg, YCC Capital. Real Estate: The Structural Problem Remains Unsolved The property market continues to be the single largest drag on China’s economy. Real estate investment fell 16.2% year-over-year through May. Monthly investment activity fell approximately 24.4%. These

YCC CAPITAL Emerging Markets & China Strategy June 21, 2026 YCC Perspective For much of the past two decades, China’s property market functioned as both an economic engine and a household wealth creation machine. For many families, purchasing an apartment was not merely a housing decision—it was a milestone marking upward mobility, financial security, and participation in China’s growth story. Today, the industry finds itself in a very different phase. The question is no longer whether the sector is contracting. That adjustment is already well underway. The more important question is whether the industry is transitioning from a liquidity crisis toward a balance-sheet repair cycle that can ultimately restore sustainable growth. To answer that question, we examined the 2025 annual reports of 152 listed Chinese property developers across A-share and Hong Kong markets. The findings suggest that while systemic risks continue to decline and debt restructuring is making meaningful progress, operational fundamentals remain fragile. The industry is stabilizing—but it is not yet healthy. This report is based on financial data and analysis contained in the underlying industry research covering 152 listed Chinese developers. Executive Summary The central message from 2025 financial statements is straightforward: The Good News Industry leverage continues to decline. Debt restructuring has accelerated. Large-scale systemic financial risks are gradually easing. High-risk developers are reducing liabilities. Debt structures are becoming more long-term and standardized. The Bad News Revenue continues to fall. Profitability remains deeply impaired. Cash flow remains negative for a fifth consecutive year. Housing demand recovery remains uneven. Lower-tier cities continue to struggle with excess inventory. Private developers remain largely shut out of capital markets. In short, China’s property sector has moved from the acute phase of crisis into a prolonged phase of rehabilitation. The State of Developer Operations Sales Remain Weak Despite Signs of Stabilization 2025 marked another year of declining revenue for listed developers. Total revenue among the sample group reached approximately RMB 3.55 trillion, down 17.6% year-over-year. While this represented an improvement from the 21% decline recorded in 2024, the industry remains firmly within a downcycle. One of the most important indicators is contract liabilities—the pre-sold but not yet delivered housing inventory that represents future revenue. At year-end 2025: Contract liabilities fell to RMB 2.04 trillion. This represented a 31% annual decline. Coverage of future revenue dropped to only 0.57x, far below the 1.01x peak reached in 2022. This means developers are entering the next one to two years with a much thinner revenue pipeline. A useful analogy is a factory running on a shrinking order book. Even if production becomes more efficient, future output becomes constrained when incoming orders continue to decline. That is increasingly the challenge facing Chinese developers. Profitability Remains Under Severe Pressure Margins Continue to Deteriorate The industry’s gross margin fell to 11.8% in 2025, the lowest level on record. Two powerful forces continue to compress profitability: 1. Weak Pricing Power Developers remain heavily reliant on discounts and promotional campaigns to generate cash flow. 2. Legacy High-Cost Land Banks Projects acquired during the boom years continue to enter delivery phases. These projects were purchased at much higher land costs than current market conditions justify. As a result: Selling prices fall. Construction costs remain elevated. Margins get squeezed from both directions. Losses Remain Widespread More than 60% of listed developers reported net losses in 2025. Asset impairments remain a major factor. Developers continue to write down: Land reserves Unsold inventory Investment properties Commercial assets The result is an industry still deeply challenged at the operational level. Why Reported Losses Improved At first glance, the numbers appear encouraging. Industry net losses narrowed by approximately RMB 156 billion in 2025. However, this improvement largely reflects debt restructuring gains rather than stronger business performance. Developers undergoing restructuring recorded significant non-recurring gains. Industry-wide non-recurring income reached roughly RMB 456 billion, the highest level on record. Without these restructuring benefits: Net losses would actually have widened. Underlying profitability remains deeply negative. The distinction matters. A company can appear healthier because its debts were renegotiated, even while its core business continues to struggle. Inventory: Falling, But For the Wrong Reasons Inventory declined significantly during 2025. Total inventory fell 15.7% year-over-year. At first glance this sounds positive. However, much of the reduction came from write-downs and impairments rather than successful sales. Developers have increasingly chosen to recognize losses and reduce the book value of assets rather than wait indefinitely for market conditions to improve. Inventory turnover remained largely unchanged: Inventory turnover period remained roughly 36 months. This suggests the actual pace of inventory absorption remains slow. The divide between cities is also becoming more pronounced: Stronger Markets Beijing Shanghai Shenzhen Core Tier-2 cities Weaker Markets Tier-3 cities Tier-4 cities Population outflow regions Inventory pressure remains concentrated in weaker local markets. Cash Flow: The Industry’s Core Challenge If one metric captures the industry’s condition, it is cash flow. The sector recorded negative aggregate cash flow for a fifth consecutive year. Net cash flow reached approximately: –RMB 177 billion More than 70% of developers reported negative net cash flow. Operating Cash Flow Operating cash flow remained broadly stable because developers adopted what could be described as a “sell less, spend less” model. As sales declined: Construction activity slowed. Procurement spending declined. New project commitments were reduced. This kept operating cash flow from deteriorating further, but it also reinforced industry contraction. Investment Activity Investment cash outflows increased modestly. Interestingly, stronger state-backed developers continued selectively purchasing land in prime cities. This reflects a growing divergence: Strong firms are becoming stronger. Weak firms continue shrinking. Financing Remains the Biggest Constraint Financing cash flow remains deeply negative. Despite government support programs and financing coordination mechanisms, developers continue to repay more debt than they can raise. Financing cash outflows reached nearly RMB 476 billion in 2025. This remains the single largest obstacle preventing a stronger recovery. Growing Industry Polarization One of the clearest themes emerging from 2025 data is increasing concentration. State-owned and centrally controlled developers continue gaining market share. Revenue Performance 2025 revenue:

YCC CAPITAL Emerging Markets & China Strategy Date: June 21, 2026 Executive Summary There are moments in economic cycles when the headline numbers tell only half the story. Walking through a shopping district today in many Chinese cities offers a useful illustration. Factories continue shipping products around the world, ports remain busy, and exporters report solid order books. Yet many households remain cautious, postponing major purchases, reducing leverage, and waiting for greater confidence about the future. That divergence defines China’s current macro landscape. May 2026 data showed: Manufacturing PMI remained at the expansion-contraction threshold. Export growth stayed exceptionally strong. Producer prices continued recovering. Consumer inflation remained positive but subdued. Retail sales disappointed. Credit demand from households and businesses remained weak. Fixed asset investment continued contracting. The property sector remained under pressure despite gradual inventory improvement. At YCC Capital, we believe the most important takeaway is not that China is falling back into recession. Rather, the economy is navigating a prolonged transition away from a property-led growth model toward a more balanced framework. That adjustment is inherently uneven and takes time. While 2026 is shaping up to be a better macro year than 2025, the conditions for a powerful V-shaped recovery remain absent. Manufacturing Activity: Stabilization Rather Than Acceleration PMI Sits Exactly on the Neutral Line China’s official manufacturing PMI registered 50.0 in May, down slightly from April and exactly at the dividing line between expansion and contraction. Large enterprises remained relatively healthy, while small and medium-sized firms experienced renewed pressure. Key observations include: Production remained in expansion territory. New orders softened. Raw material inventories declined. Employment indicators weakened. Supplier delivery times lengthened further. The message is straightforward: factories continue producing, but demand growth is not keeping pace. Meanwhile, the non-manufacturing PMI improved modestly to 50.1, led primarily by services, while construction activity remained weak. YCC View China’s industrial sector remains supported by export competitiveness and ongoing supply-chain advantages. However, domestic demand has not yet become a sufficiently powerful second engine. The economy is moving forward, but not accelerating. Inflation: Producer Prices Recover Faster Than Consumer Prices CPI Remains Benign Consumer inflation rose 1.2% year-over-year in May. Food prices continued to exert downward pressure, particularly pork prices, while service-related categories showed moderate gains. Consumer price dynamics remain remarkably restrained despite policy easing. This reflects: Cautious household spending behavior. Weak housing-related demand. Limited pricing power among retailers. High savings preferences among consumers. PPI Continues Recovering Producer prices increased 3.9% year-over-year, extending the recovery trend observed throughout 2026. Rising energy prices, particularly in coal, petrochemicals, and non-ferrous metals, contributed significantly to the improvement. Notably, producer inflation is rising faster than consumer inflation. Historically, this pattern often appears in the early stages of cyclical recoveries when industrial activity improves before household demand fully rebounds. YCC View Inflation conditions remain constructive rather than problematic. We expect: CPI to continue gradually rising. PPI momentum to moderate somewhat if global energy prices ease. Deflation concerns to continue fading throughout 2026. Trade: Exports Continue to Surprise on the Upside External Demand Remains the Bright Spot China’s total trade volume reached $648.1 billion in May, representing 22.6% year-over-year growth. Key figures: Indicator May 2026 Exports $376.8 billion Export Growth +19.4% YoY Imports $271.4 billion Import Growth +27.4% YoY Trade Surplus $105.4 billion Export growth remained strong across major trading partners. Highlights include: Exports to the United States rose 35.4%. Exports to ASEAN increased 24.3%. Exports to the European Union rose 7.6%. Exports to Japan increased 10.9%. A particularly notable trend is the continued expansion of ASEAN’s role within China’s export ecosystem. Why Exports Are Holding Up Chinese manufacturers continue benefiting from: Scale advantages. Cost competitiveness. Technological upgrading. Strong demand for industrial products and intermediate goods globally. YCC View The biggest threat to China’s exports is not tariffs. The larger risk is a broader slowdown in global growth. If the U.S. economy enters recession or global demand weakens materially, export momentum could fade quickly. Until then, exports remain China’s strongest macro pillar. Credit Conditions: Weak Demand for Borrowing Persists Perhaps the most revealing part of the May data came from financial indicators. Social Financing Growth Slows Outstanding Total Social Financing (TSF) expanded 7.7% year-over-year, while RMB loans to the real economy increased only 5.5%. More importantly, underlying demand remains soft. Household Borrowing Weakens In May: Household loans declined. Short-term consumer loans fell. Medium and long-term housing-related loans also contracted. This signals continued caution among consumers. People are choosing to save rather than spend or leverage. Corporate Borrowing Also Remains Muted Corporate lending showed little evidence of a major investment cycle. Short-term and long-term corporate loans remained weak, while much of the increase came through bill financing rather than productive investment borrowing. That is often a sign that: Business confidence remains fragile. Firms are prioritizing liquidity management. Capital expenditure plans remain conservative. YCC View Credit data suggest that monetary easing alone cannot solve the problem. The challenge today is not credit supply. The challenge is credit demand. Until households regain confidence and businesses see stronger future opportunities, borrowing activity will likely remain subdued. Consumption and Investment: The Missing Piece of the Recovery Retail Sales Disappoint May retail sales fell 0.6% year-over-year, reflecting both base effects and underlying demand weakness. Several key categories remained particularly weak: Automobiles Building materials Furniture Household appliances These sectors share an important characteristic: They are closely linked to housing activity. When property transactions slow, the ripple effects extend across the broader consumption ecosystem. A Real-World Example Buying a home is rarely a single purchase. A new apartment often leads to: Furniture purchases. Appliance upgrades. Renovation spending. Vehicle purchases. Increased discretionary consumption. When housing activity weakens, many of those secondary spending channels weaken as well. This helps explain why consumption remains sluggish despite improving industrial conditions. Fixed Asset Investment Continues Contracting During January-May: Fixed asset investment fell 4.1%. Private sector investment fell 7.1%. Manufacturing investment rose modestly. Infrastructure investment remained positive but moderate. The divergence between public and private investment remains striking. Private sector confidence has yet

Why the KWEB Round Trip Is a Governance Warning, Not Just a Valuation Opportunity Report Date: June 14, 2026   |   Source: Bloomberg, YCC Capital YCC Capital Perspective: The most important chart in China today is not GDP, retail sales, or export volume. It is the long-term price chart of China internet equities. The KraneShares CSI China Internet ETF (KWEB) listed in 2013 around $26 and, according to the referenced screen capture, recently traded at $26.49. That is a decade-plus round trip in the price of an asset class that once represented the cleanest investable expression of Chinese innovation, consumption, and digital productivity. The lesson is not that Chinese entrepreneurs failed. The lesson is that private shareholder value was repeatedly subordinated to political objectives, social control, capital-account management, and policy discretion. Executive Summary KWEB is the cleanest public-market case study of the China private-sector risk premium: a growth ETF that moved from euphoria to policy discount, round-tripping from its 2013 listing price after peaking above $100 in 2021. The last five years rewired the investment case: Ant Group was halted, Alibaba was fined, for-profit tutoring was dismantled, DiDi was punished after listing, golden shares expanded, property wealth collapsed, and population decline became official reality. China internet companies remain operationally impressive, but equity owners no longer control the residual claim in the way investors assume in liberal-market systems. The state has become both regulator and shadow strategic shareholder. For global allocators, the strategic issue is not whether Chinese stocks can rally. They can. The issue is whether rallies compensate investors for a structurally higher governance, capital-flow, and geopolitical discount. YCC Capital views China-linked risk assets as trading instruments, not default strategic allocations. Exposure should be sized around policy tail risk, not index weight. Figure 1: KWEB Price Round Trip Since Listing KraneShares CSI China Internet ETF, price level, approximate points from public market data and screenshot. KWEB At-a-Glance Data Point ETF inception July 31, 2013 Early listed price reference $26.31 on Aug. 2, 2013 Recent price reference $26.49 Price change since early reference +$0.18 / +0.68% 2021 cycle peak Above $100 52-week range shown in screenshot $25.90 to $43.36 Source: Bloomberg, YCC Capital. Price-only reference; does not include distributions or taxes. I. The KWEB Chart: The Perfect Autopsy of a Broken Growth Narrative KWEB was launched on July 31, 2013 and seeks to track the CSI Overseas China Internet Index, providing concentrated exposure to China-based internet and platform companies listed offshore and in Hong Kong. In the 2010s, this was marketed as one of the purest ways to own China’s rising consumer class: e-commerce, digital payments, food delivery, online entertainment, gaming, search, online travel, and social media. For several years, the logic worked. Chinese internet platforms compounded users, gross merchandise volume, advertising revenue, cloud adoption, and payments penetration. The sector combined the growth profile of Silicon Valley with the demographic scale of a continental economy. By early 2021, KWEB traded above $100. In hindsight, that peak was not merely a valuation top; it was the last market price of the old social contract between Beijing and private capital. The current price near the original listing price is therefore more than a disappointing return. It is a market verdict. Investors who bought a decade of Chinese internet growth effectively received a decade of political repricing. The businesses grew, the user bases grew, the technology improved, and the market capitalization still vaporized. That is the defining feature of regime risk: fundamentals can move one way while ownership value moves the other. The KWEB round trip also destroys a common allocator defense: “China always comes back.” China often does stimulate, stabilize, and engineer powerful bear-market rallies. But the chart shows that tactical recoveries do not necessarily repair structural impairment. A stock can rally 50% and still remain trapped in a lower valuation regime if the discount rate has permanently changed. II. The Five-Year Timeline: From Platform Capitalism to Platform Supervision Period Policy / Market Event Investment Meaning Late 2020 Ant Group’s planned IPO was halted after Jack Ma’s public criticism of financial regulators. The state signaled that systemically important private platforms would not be permitted to set the terms of financial innovation. 2021 Alibaba received a record antitrust fine; DiDi faced cybersecurity scrutiny shortly after its U.S. listing; the Double Reduction policy dismantled much of the for-profit K-12 tutoring industry. The market learned that profitable, VC-backed sectors could become policy liabilities overnight. 2021-2022 Evergrande defaulted and the property downturn widened; zero-Covid disruptions damaged consumption and small-business confidence. The macro backdrop shifted from property-led wealth creation to balance-sheet repair and household caution. 2022-2023 PCAOB access lowered immediate ADR delisting risk, while Beijing also moved toward golden-share influence in key internet subsidiaries. A U.S. listing became less binary, but political control became more institutionalized. 2023-2024 Reopening produced a weaker-than-expected recovery; Alibaba announced restructuring; regulators later declared parts of the Alibaba rectification process complete. The state shifted from punishment to stabilization, but not back to the pre-2020 model of platform autonomy. 2024-2026 Evergrande liquidation/delisting, continuing property weakness, population decline, deflationary pressure, content-control campaigns, and renewed cross-border investment scrutiny. China internet moved from a growth-beta asset to a policy-cycle asset with embedded capital-control and geopolitical risk. Source: Bloomberg, YCC Capital. III. Xi’s Collision With Economic Reality The original bull case for China internet assumed that the state would tolerate private platforms because they delivered growth, employment, convenience, consumption, tax revenue, and global prestige. That assumption underestimated the degree to which the Chinese Communist Party treats large private networks as political infrastructure. Once platforms became gateways to credit, data, speech, youth culture, education, employment, and household balance sheets, they stopped being ordinary listed companies. They became instruments of national governance. The crackdown on private enterprise has therefore been more than a sector rotation. It reflected a reordering of priorities: common prosperity over platform margins, data security over shareholder transparency, ideological supervision over algorithmic freedom, financial stability over fintech disruption, and social control over consumer internet monetization. In