China–US Policy Brief (October 28): Fed Holds Rates, 800 Billion Yuan Policy Tool Fully Deployed, Microsoft and Alphabet Earnings Diverge

US Policy

Fed holds at 3.75%–4.00%, 10–2 (confirmed). The Federal Open Market Committee announced at 2:00 p.m. ET on October 28 that it would maintain the federal funds target range. Governor Lisa Cook and Cleveland Fed President Beth Hammack dissented, both preferring a quarter-point hike. The statement upgraded its assessment of economic activity from "solid" to "strong," citing resilient domestic spending, strong productivity growth and robust capital investment, while noting inflation "remains elevated" and that the Committee "will deliver price stability." Before the decision, CME FedWatch put the probability of a hold at about 93%.

Warsh: politics played no role; one strategy meeting a year from 2027 (confirmed). Fed Chair Kevin Warsh told reporters that politics "played no role" in the decision. He also announced that, from 2027, one of the eight annual meetings will be devoted solely to monetary policy strategy, with no rate vote and no statement, and that there will be two such meetings in 2028. Warsh reiterated that he does not submit a dot plot and does not preset a soft inflation target. The two hawkish dissents keep a December hike in play as the next question.

Trump in Texas: methane rule rollback and first Venezuelan oil shipment (confirmed; 51st-state remark was campaign rhetoric). On October 27, President Donald Trump campaigned in Texas for Republican Senate candidate Ken Paxton, announcing the termination of Biden-era oil and gas methane rules, which he said would save $45 billion in costs and unlock 210 million barrels of oil capacity. He also showcased a tanker carrying 1 million barrels of Venezuelan crude, which he said was provided to US taxpayers at zero cost and would be sold to Exxon Mobil and Citgo refineries. His quip about making Venezuela the 51st state was reported by multiple outlets as campaign-stage rhetoric, not an enacted policy. Energy prices are the top issue ahead of the November 3 midterms, but 1 million barrels is roughly five hours of US consumption, so the near-term price effect is limited.

Market backdrop: US stocks closed higher on October 28: the S&P 500 rose 0.28% to 7,743.98, the Dow gained 0.19% to 52,475.10, and the Nasdaq added 0.27% to 26,549.85, a third straight gain for all three. The 10-year Treasury yield stood near 5.02%–5.05%, and gold closed near $4,068 per ounce.

China Policy

800 billion yuan of new policy financial instruments fully deployed (confirmed). Xinhua reported on October 28 that the full 2026 allocation of new policy financial instruments had been deployed: 365 billion yuan from China Development Bank, 120 billion yuan from Export-Import Bank of China, and 315 billion yuan from Agricultural Development Bank of China. The CDB portion was used entirely to supplement project capital, covering projects worth 5.5 trillion yuan in total investment; 127.99 billion yuan (35.1%) went to private-investment projects and 179.01 billion yuan (49%) to AI, the digital economy, green and low-carbon, biomedicine and consumption projects. The deployment shifts the "15th Five-Year Plan" opening year from quota allocation to physical work.

PBOC open-market operations on October 28 (confirmed). The central bank conducted 151 billion yuan of 7-day reverse repos at 1.40% and 10 trillion yuan of overnight reverse repos, while 10 trillion yuan of 1-day reverse repos matured. With October 20 LPRs unchanged (1-year at 3.0%, 5-year-plus at 3.5%), short-term liquidity operations remain the main adjustment tool, alongside the bond-market non-bank large-redemption swap facility set up earlier, aimed at smoothing month-end funding and non-bank redemption pressure.

Loan data: 283.44 trillion yuan outstanding at end-Q3, up 4.8% year on year (confirmed). New yuan loans in the first three quarters totaled 11.52 trillion yuan; personal housing loans stood at 35.91 trillion yuan at end-Q3, down 4.1% year on year. Credit growth remains moderate while mortgage balances keep shrinking, so the effect of the mortgage interest subsidy policy (announced September 29, effective October 1) still needs to be judged on fourth-quarter new mortgage data.

Shanghai intelligent manufacturing plan: 8,000 humanoid robots into factories by 2028 (confirmed). The Shanghai Municipal Commission of Economy and Informatization's plan, issued October 27, supports breakthroughs in humanoid, collaborative and high-precision heavy-load robots and AI-enabled upgrades of industrial machine tools, targeting 8,000 humanoid robots in factories by 2028 and an industrial robot density of 600 per 10,000 workers. The Ministry of Industry and Information Technology reports humanoid robot output above 40,000 units in the first half of 2026, with full-year output expected to exceed 100,000. The industry is moving from demonstration to factory acceptance, where continuous-operation stability and unit operating cost matter most.

Fifth Plenary Session in progress; communique expected October 29. The 20th Central Committee's fifth plenary session runs October 26–29 in Beijing, with the agenda covering the Politburo's work report and advancing full and strict Party governance. No official communique had been released as of this writing; it is expected after the session closes on October 29 and is the week's biggest policy watch item. Unverified personnel rumors circulating in the session period are not included here.

US-Stock Watchlist

Microsoft (MSFT, cloud and software). Fiscal Q1 2027 revenue was $92.3 billion, up 19% year on year and above the roughly $90.7 billion consensus; adjusted EPS was $4.89 versus $4.73 expected; Azure revenue was $33.2 billion, up 48% (from 42% last quarter) and disclosed in dollar terms for the first time; Microsoft Cloud revenue was $63.9 billion, up 30%; commercial remaining performance obligation was $677 billion, up 73%. Analyst price targets: JPMorgan $625, Oppenheimer $625, Raymond James $630, Bank of America $600, with a market mean near $601.73 as of October 25. The stock closed at $531.01 on October 28 and rose about 4% after hours to about $551. Risk: AI infrastructure spending remains large, and delivery pace and Copilot monetization are the key variables; analyst targets are opinions, not investment advice.

Oracle (ORCL, cloud infrastructure and databases). At its October 28 Investor Day, Oracle set a fiscal 2030 outlook of total revenue of $225 billion or more, a compound annual growth rate above 35% from fiscal 2026 to fiscal 2030, a non-GAAP operating margin of 40% or more, and non-GAAP EPS of $21 or more; fiscal 2027 sales of at least $90 billion (versus $67.4 billion in fiscal 2026); free cash flow turning positive in the second half of fiscal 2028 and reaching at least $30 billion in fiscal 2029. The stock closed at $144.54, up 10.73%. Analyst price targets (pre-Investor Day): Evercore $245, Barclays $252, Bernstein $325. Risk: Evercore estimates Oracle needs another $50–$60 billion before free cash flow turns positive, so the speed at which backlog converts to cash is critical; the December 14 second-quarter report is the next test.

Vertiv (VRT, data-center power and cooling). Third-quarter revenue was $4.313 billion, up 61% year on year (55% organic), with adjusted EPS of $2.21 versus $1.82 expected; organic orders more than doubled year on year, and adjusted operating margin was 25.2%, up 290 basis points; full-year 2026 guidance was raised to revenue of $14.45–$14.85 billion and adjusted EPS of $7.10–$7.20. The stock closed at $242.94, up 16.48%. Analyst price target: Cestrian Capital, Accumulate, $329. Risk: converting orders into profit depends on delivery and supply chains, and any slowdown in hyperscaler capital spending would hit order growth directly.

Alphabet (GOOGL, search, cloud and advertising). Third-quarter revenue was $127.6 billion, up 25% year on year and slightly below expectations; EPS was $2.12, far below the $3.02 consensus, mainly due to an $8.7 billion loss on equity securities; Search revenue of $63.4 billion and YouTube advertising of $11.2 billion both missed estimates; cloud revenue of $30.7 billion doubled year on year, the bright spot; free cash flow was negative $9.1 billion. Shares fell about 7%–10% after hours. Analyst price targets: Citizens $450 (cut from $515 on October 22), BMO $480, KeyBanc $410, with a market mean near $430.51. Risk: AI search competition, heavy capital spending and equity-investment volatility are the main risks; even doubled cloud growth did not offset the profit and cash-flow questions.

Week ahead: October 29 — Fifth Plenary Session communique, US Q3 GDP advance estimate and September PCE, ECB decision, FCC meeting, Amazon and Apple earnings; October 30 — Exxon Mobil Q3 results and Bank of Japan decision; October 31 — Youyou Network Q3 results and 18 banks' Q3 reports.

For informational purposes only, not investment advice.