<p>Recently, the RMB exchange rate has continued to rise, and foreign investment banks have been optimistic about China, with related assets being highly regarded. Tao Dong, President and Chief Economist of Freshwater Capital (Hong Kong), stated in a recent interview with domestic media outlet The Paper that &#34;the level of optimism towards RMB assets is the highest in the past seven to eight years,&#34; and clearly stated that &#34;the opportunity has arrived.&#34; He also pointed out that the Chinese economy has shifted from &#34;benefiting from the cement dividend&#34; to &#34;benefiting from the data dividend,&#34; and a bull market in the field of technological self-innovation has emerged.</p>
<h2>Asset is King: Focus on Two Major Directions</h2>
<p>Tao Dong believes that we have entered an era of &#34;asset is king,&#34; with two major directions worth paying attention to: one is to stay away from assets controlled by (overseas) central banks, and the other is to closely follow the wave of technological breakthroughs. Both paths effectively resist the risks brought by inflation and policy fluctuations.</p>
<h2>Federal Reserve to Maintain Looser Policy in the Long Run</h2>
<p>Regarding the Federal Reserve's policy direction, Tao Dong believes that in the long run, monetary policy will still be primarily loose, but in the short term, it may be in an observation period. He explained that &#34;the massive spending by the U.S. government has created a huge fiscal deficit, leading to a return of overseas funds to the domestic bond market. The Federal Reserve must provide a fiscal backstop, as monetary policy and fiscal policy are two sides of the same coin.&#34; However, the rising prices in the U.S. service sector are a structural issue, making it difficult to stabilize overall inflation near the 2% policy target in the short term, which is an important economic factor restraining the Federal Reserve's decision-making.</p>
<h2>Political Game Cannot Be Ignored</h2>
<p>He mentioned that the political game cannot be ignored either. Powell's term ends in May, and to demonstrate policy independence, there is a high possibility of inaction in the first half of this year; conversely, as the U.S. midterm elections approach in the second half of the year, the new Federal Reserve Chairman may take more aggressive rate cuts, &#34;with rates expected to drop to around 3% neutral level within the next 6 to 9 months, potentially exceeding current market expectations.&#34;</p>
<h2>Warning: U.S. Bond Market Faces Risks</h2>
<p>Tao Dong also highlighted the risks facing the U.S. bond market, stating, &#34;Thirty years ago when I entered the industry, the market viewed U.S. bonds as zero-risk assets, but this logic has been overturned on three levels.&#34; First, the repeated implementation of quantitative easing after 2008 has normalized the central bank's reliance on unconventional monetary policy tools; second, rising interest rates in major economies like Japan and Germany have triggered a return of funds that had previously been overseas; third, Trump's policies have intensified doubts about the dollar's credibility, and traditional allies' unconditional trust in U.S. bonds has already weakened.</p>
<h2>Precious Metals Have Long-Term Allocation Value</h2>
<p>As concerns about dollar credibility emerge, Tao Dong indicated that at this stage, gold &#34;will only be bought at a high price, not at a wrong price,&#34; and copper also faces structural demand in AI and power grid construction. If copper prices remain high, aluminum may also become an alternative metal for AI infrastructure and part of national strategic reserves. Therefore, overall, the precious metals and non-ferrous metals sectors have long-term allocation value.</p>
<h2>This Year Expected to Be the Year of AI Application Landing</h2>
<p>On the other hand, Tao Dong also predicts that 2026 will be the &#34;year of application landing&#34; for the AI industry, with the competitive focus shifting from &#34;competing on parameters and technology&#34; to &#34;competing on applications and profitability,&#34; entering a reshuffling phase. Companies with weak finances may trigger a chain reaction due to financing difficulties. He specifically warned that AI has become the core driving force of the U.S. economy, with related investments accounting for over 50% of total investment, with a large amount of capital tied up in banks, bonds, and private credit. &#34;Once the AI sector experiences a severe adjustment, it may trigger systemic risks, at which point the Federal Reserve and the White House will inevitably intervene to stabilize the market.&#34;
The policy direction may experience a dramatic turn.</p>
<h2>The primary risk comes from &#34;crowded trades&#34;</h2>
<p>Tao Dong also warned that the primary risk in the market in 2026 does not stem from fundamentals, but rather from &#34;crowded trades.&#34; When consensus is too uniform, even minor disturbances can trigger severe adjustments, with U.S. Treasuries and the AI sector closely related to this potential risk. Additionally, fiscal sustainability is becoming a global concern, with the U.S. deficit accounting for 6.8% of GDP, and major economies like France and the UK also experiencing high deficit rates. If a major economy were to face a debt crisis, it could trigger a chain of financial turmoil against the backdrop of the current ineffective international policy coordination mechanism</p>

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<p>Tao Dong stated that the opportunity for RMB assets has arrived, and a bull market in technological independence is emerging. Currently, it is the era of "assets are king," focusing on assets that are away from central bank control and technological breakthroughs. It is expected that the Federal Reserve will maintain an accommodative policy, but may observe in the short term. The U.S. Treasury market faces risks, and the logic of traditional zero-risk assets has been overturned, necessitating caution as future interest rates may drop to around 3%</p>

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Tao Dong: The opportunity for RMB assets has arrived, the bull market for technological independence is emerging, and it warns of the risks of U.S. Treasury bonds. "Buying gold at a high price won't be a mistake."