大摩-假如美国深度衰退对亚洲的影响 The Viewpoint US Deeper SlowdownRecession Scenarios – What Does It Mean for Asia 0821 2024

Morganstanley

August21,202408:38PMGMT

RESEARCH

Idea

AsiaEconomics|AsiaPacific

TheViewpoint:USDeeper

Slowdown/RecessionScenarios

–WhatDoesItMeanforAsia?

AsiaismoreexposedtoaUSgrowthslowdownthistimearoundasAsiaexChinaismoredependentontheUS,whileChinais

lesslikelytoprovidethesamedegreeofcounter-cyclicalsupportcomparedwithpreviousdownturns.

KeyTakeaways

SlowerUSgrowthtransmitstoAsiaviatradeandfinancialconditions.Roomforcounter-cyclicalfiscal/monetaryeasingwillalsodeterminethefinaloutcome.

AsiaexChinaismoreexposedtotheUS.ItstradesurpluswiththeUSreachedanewhighofUS$380bn,whileitstradedeficitwithChinawidenedtoUS$280bn.

WedonotthinkthatChinawillbeabletoprovidethecounter-cyclicalsupporttotheregionasitusedto,giventheongoingdebt-deflationchallenge.

IftheUSfacesadeeperslowdownasopposedtoourbasecaseofasoftlanding,thedownsideforAsiawillstillbemanageable.

However,USrecessionwillmeanpotentialcontractioninexportsandmaterialtighteningoffinancialconditions.Policysupportwillnotbeameaningfuloffset.

Exhibit1:AsiaexChinaismoreexposedtoaUSgrowthslowdowninthiscycle

12Mtrailingsum

240

200

160

120

80

40

0

Jun-12

Jun-13

Jun-14

Jun-15

Jun-16

Jun-17

Jun-18

Jun-19

Jun-20

Jun-21

Jun-22

Jun-23

Jun-24

AXJexChinatradesurpluswithUS(US$bn)

USshareinAXJexChinaexports(%,RS)

16%

14%

12%

10%

8%

Source:CEIC,MorganStanleyResearch

MorganStanleyAsiaLimited

ChetanAhya

ChiefAsiaEconomist

Chetan.Ahya@+8522239-7812

MorganStanleyAsia(Singapore)Pte.

DerrickYKam

AsiaEconomist

Derrick.Kam@+656834-8272

MorganStanleyAsiaLimited

JonathanCheung

Economist

Jonathan.Cheung@+8522848-5652

KellyWang

Economist

Kelly.Wang@+8523963-0891

Forimportantdisclosures,refertotheDisclosureSection,locatedattheendofthisreport.

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Morganstanley

RESEARCH

Idea

HowMuchWillaSlowerUSEconomyHurtAsia

WhatiftheUSslowsmorethanexpected:ThebasecaseisstillasoftlandingfortheUSeconomy,asdetailedbyourglobalandUSeconomicsteams(seeTheWeeklyWorldview:RisingCentralBankAction(12Aug2024),FridayFinish–USEconomics:Aslowing,nota

slump:whatwe'rewatching(9Aug2024),USEconomics:SomeweakJulydatabutwe

stillexpectasoftlanding(5Aug2024)),andthatformsthebasisofourbase-case

forecastsforAsia.SincetheweakJulylabourdataledtoagrowthscare,investorsare

evaluatingtherisksofadeeperslowdownintheUSandhavebecomemorealertto

recessionrisks.Wethereforeexploretheriskscenariosof:1)adeeperslowdowninthe

US;and2)theUSfallingintorecessionandwhatthatwouldmeanforAsia.Our

perspectiveisthatinadeeperslowdownintheUS,Asiawillfacemoderatedownside,butitwillnotbeimmuneinthecaseofaUSrecession.TheeconomiesofJapan,Koreaand

Taiwanwouldbemostexposed,whileChinaandIndiawouldbemoderatelyexposed,andAustraliaandIndonesiaareleastdirectlyexposedthoughtheymaystillbeaffectedasUSrecessionarydynamicsweighoncommodityprices.

ThecurrentstateofAsia’stradecycle

Exhibit2:Asia’sexportshavebeenstrong–Outperformingglobalexportsoverthepast10months

Realexports(SA,%Y,3MMA)

Global(CPB)China

AsiaexChina

25%20%15%10% 5% 0% -5%-10%-15%

Jun-19Jun-20Jun-21Jun-22Jun-23Jun-24

Source:Haver,CPBWorldTradeMonitor,MorganStanleyResearch

Exhibit4:Asia’sexportsupliftedbytheexportsofcapitalgoods…

170

160

150

Asianominalexportsbyend-use(SA,Dec-19=100)

Consumergoods(24%)

Capitalgoods(32%)

Commodities(20%)

Intermediategoods(23%)

140

133

130

120

128

124

119

110

100

90

Dec-19

Mar-20

Jun-20

Sep-20

Dec-20

Mar-21

Jun-21

Sep-21

Dec-21

Mar-22

Jun-22

Sep-22

Dec-22

Mar-23

Jun-23

Sep-23

Dec-23

Mar-24

Jun-24

Source:Haver,CEIC,MorganStanleyResearch

Exhibit3:ExposuretoUSenddemandhashelpedAsia’sexportstodowell

120

115

110

105

100

95

90

85

118

Dec-19

Mar-20

Jun-20

Sep-20

Dec-20

Mar-21

Jun-21

Sep-21

Dec-21

Mar-22

Jun-22

Sep-22

Dec-22

Mar-23

Jun-23

Sep-23

Dec-23

Mar-24

Jun-24

Realimports(SA,Dec-19=1003MMA)

112

111

US

97

Euroarea

China

AsiaexChina

Source:Haver,MorganStanleyResearch

Exhibit5:…WhichinturnisagaintiedtostrongcapexdemandfromtheUS

130

120

110

100

90

80

Dec-19

Mar-20

Jun-20

Sep-20

Dec-20

Mar-21

Jun-21

Sep-21

Dec-21

Mar-22

Jun-22

Sep-22

Dec-22

Mar-23

Jun-23

Sep-23

Dec-23

Mar-24

Jun-24

USrealimports(SA,Dec-19=100)

Capitalgoodsimport

Non-foodconsumergoodsimport(incl.autos)

136

121

Source:Haver,MorganStanleyResearch

Morganstanley

RESEARCH

Idea

Exhibit6:Techexportsaremuchstrongerthannon-tech

exports…

150

140

130

120

110

Asianominalexports(SA,Dec-19=100)

Tech

134

128

127

Non-tech

Total

100

90

Jun-19

Sep-19

Dec-19

Mar-20

Jun-20

Sep-20

Dec-20

Mar-21

Jun-21

Sep-21

Dec-21

Mar-22

Jun-22

Sep-22

Dec-22

Mar-23

Jun-23

Sep-23

Dec-23

Mar-24

Jun-24

Source:CEIC,MorganStanleyResearch

Exhibit7:…SupportedbytheongoingtechcapexrecoveryintheUS

20%18%16%14%12%10%8%6%4%2%0%

Jun-06

Jun-07

Jun-08

Jun-09

Jun-10

Jun-11

Jun-12

Jun-13

Jun-14

Jun-15

Jun-16

Jun-17

Jun-18

Jun-19

Jun-20

Jun-21

Jun-22

Jun-23

Jun-24

USrealnon-residentialcapex(%Y)

Privatenon-residential:ITcapex

Asiarealexports(%Y3MMA)(RS)

30%25%20%15%10%5%

0%

-5%-10%

Source:CEIC,MorganStanleyResearch

Exhibit8:ExportsstrengthhasbeensustainedintoAugust,asevidentinKorea’s20-daydata

Koreadailyexports(%Y)

50%

40%

first10daysfirst20daysfullmonth

30%

20%

10%

0%

-10%

-20%

-30%

Aug-19Aug-20Aug-21Aug-22Aug-23Aug-24

Source:Haver,MorganStanleyResearch

Exhibit9:Sixoutof10AsianeconomiessawbetternewexportorderreadingsinJuly

Deltainnewexportorders(Julyvs.June2024,%pp)

8.4

0.90.70.4

0.20.2

-0.04

-0.2-0.9

-5.9

Thailand India Japan Indonesia China Malaysia Korea TaiwanPhilippinesAustralia

-7.0-5.0-3.0-1.01.03.05.07.09.0

Source:Markit,HaverAnalytics,nationalsources,MorganStanleyResearch

MorganStanleyResearch3

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Morganstanley

RESEARCH

Idea

RiskScenario#1:ADeeperSlowdownintheUS

AdeeperUSslowdownwouldmeanadiminishedtailwindforAsia:IfUSgrowthslowsmoresubstantially(i.e.,to1%YoY)thaninourbasecase,itwouldweakenthesupportforAsia’sexports.

•AsiaexChinaismoreleveredtoUS:Sincetheonsetoftradetensionsin2018,

supply-chaindiversificationeffortshavemeantthatAsiaexChina’strade

dependenceontheUShasincreased.Asiahassevenofthe10economieswiththehighesttradesurpluseswiththeUS.Atthemargin,USdemandhasalsobeenthekeydriverforAsiaexChina’sexportsgivenweakergrowthtrendsintherestoftheworldincludingChina.TechdemandhashelpedtodrivestrengthinAsia’stech

exportsandifthatissustained,itcanbeapotentialmitigatingfactor.Asaresult,theregionex-China’saggregatetradesurpluswiththeUShasrisensteadilyfromUS$171bnona12MtrailingbasisinSep-18toUS$384bncurrently.Similarly,US’shareinAsiaexChinaexportshasincreasedfrom11.7%inSep-18to14.2%

currently.

•ForChina,thedependenceonUSenddemandislowerthanbeforebutstill

relativelyhigh:EffortstoexportnewproductstonewergeographieshasmeantChina’sdependenceontheUSasasourceofenddemandhasdeclined.TheUS

shareofChina’soveralltradesurplushasdeclinedfrom70%inDec-19toastill-

elevated40%.USshareinChina’sexportshasalsodeclinedmarkedlyfrom19.1%inSep-18to14.6%now.WhileeffortstorerouteUS-Chinatradeviathird-party

economieshasmeantthereduceddependencetrendcouldbesomewhat

overstated,wehaveseenevidencethattrade-reroutinghasdeclinedsteadily(seeTheViewpoint:Addressingyourquestionsontariffs,22July2024).

Exhibit10:AsiaexChinaismoredependentontheUS–AsharpriseintradesurpluswiththeUS

400

300

200

100

0

-100

-200

-300

-400

Jul-12

Jul-13

Jul-14

Jul-15

Jul-16

Jul-17

Jul-18

Jul-19

Jul-20

Jul-21

Jul-22

Jul-23

Jul-24

AsiaexChinaTradeBalance(12Mtrailingsum,US$bn)

Jun-24384

Dec-17174

Sep-18

171

Dec-…

Sep-18

-72.1Jul-24

-282

TradebalancewithUS

TradebalancewithChina

Source:Haver,MorganStanleyResearch

Exhibit11:AsiaexChinaexportstoUSshareofoverallexportshasrisen

15%AsiaexChinaexportstoUS(%oftotalexports,12Mtrailingsum)

14.2%

14%

13%

12%

Dec-19:

12.6%

\Sep-18:/11.7%

11%

May-16May-17May-18May-19May-20May-21May-22May-23May-24

Source:Haver,MorganStanleyResearch

er(US$bn,trailing

Morganstanley

RESEARCH

Idea

Exhibit12:Incontrast,US’shareofChina’stradesurplushasdeclined

1000

900

800

700

600

500

400

300

200

100

Jul-16

Dec-16

May-17

Oct-17

Mar-18

Aug-18

Jan-19

Jun-19

Nov-19

Apr-20

Sep-20

Feb-21

Jul-21

Dec-21

May-22

Oct-22

Mar-23

Aug-23

Jan-24

Jun-24

Chinatradebalance(US$bn,12Mtrailingsum)

Totaltradebalance

surpluswiththe

ChinatradebalancewithUSChina'strade

USaccountsfor

40%ofoverall

tradesurplus

Source:Haver,MorganStanleyResearch

Exhibit13:China’stradeexposuretotheUShasalsodeclined

ChinaexportstoUS(%oftotalexports,12Mtrailingsum)

19%

Sep-18:

18%

19.1%\

17%

Dec-19:16.7%

16%

14.6%

15%

14%

Jul-16Jul-17Jul-18Jul-19Jul-20Jul-21Jul-22Jul-23Jul-24

Source:Haver,MorganStanleyResearch

Exhibit14:AxJexChinatradesurpluswithUSas%ofGDPhasrisen

12Mtrailingsum

3.0%

AXJexChinatradesurpluswithUS(%ofGDP)

2.0%

1.0%

0.0%

Jun-12

Jun-13

Jun-14

Jun-15

Jun-16

Jun-17

Jun-18

Jun-19

Jun-20

Jun-21

Jun-22

Jun-23

Jun-24

Source:Haver,MorganStanleyResearch

Exhibit16:Japan,KoreaandTaiwanaremoreexposedtoUSenddemand

GoodsExportstoUS(%oftotalexports)

24%

20%

16%

12%

8%

4%

0%

(Apr-24,12Mtrailing)

J

P

TW

IN

KR

TH

P

H

CN

ID

MY

AU

10%20%30%40%50%60%70%80%

GoodsExportstoGDP

Source:Haver,MorganStanleyResearch

Exhibit15:ChinatradesurpluswithUSas%ofGDPhasedgedslightlylower

12Mtrailingsum

Jun-12

Jun-13

Jun-14

Jun-15

Jun-16

Jun-17

Jun-18

Jun-19

Jun-20

Jun-21

Jun-22

Jun-23

Jun-24

ChinatradebalancewithUS(%ofGDP)

2.9%2.7%2.5%2.3%2.1%1.9%1.7%1.5%

Source:Haver,MorganStanleyResearch

Exhibit17:WithChinaunlikelytobethecountercyclicalforceinthiscycle,exposuretoChinawillnothelpoffsetslowdowninUSdemand

(Apr-24,12Mtrailing)

GoodsExportstoChina(%oftotal

exports)

40%35%30%25%20%15%10% 5%0%

AU

ID

TW

J

P

KR

PH

TH

MY

IN

10%20%30%40%50%60%70%80%

GoodsExportstoGDP

Source:Haver,MorganStanleyResearch

MorganStanleyResearch5

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Morganstanley

RESEARCH

Idea

Exhibit18:

WhicheconomiesaremoreexposedtotheUSeconomy?

ChinaIndiaIndonesiaKoreaMalaysiaPhilippinesTaiwanThailandAustraliaJapan

ExposuretoUS(exportstoUS%oftotalexports)15%18%*9%19%12%16%21%17%4%20%

TradebalanceingoodswithUS(%ofGDP)

1.6%

1.2%*

1.2%

3.3%

6.2%

0.8%

7.1%

8.2%

-1.1%

1.8%

Overalldependenceonexternaldemand(totalexports%ofGDP)Roomforcounter-cyclicalresponse

19%

12%

18%

36%

78%

17%

59%

57%

21%

17%

NominalratedifferentialwithUS(current)

-3.7

1.1

0.9

-1.9

-2.4

0.9

-3.4

-2.9

-1.0

-5.1

RealratedifferentialwithUS(current,on12MforwardCPI)

-2.4

-1.0

0.4

-2.1

-2.3

-0.7

-3.8

-2.1

-2.4

-5.0

Fiscaldeficitchange(%ofGDP,2024Evs.2019)

1.3%

-0.5%

-0.1%

-1.0%

-1.5%

-2.6%

1.3%

-4.1%

3.1%

-3.5%

OverallRating

Moderate

Moderate

Low

High

Moderate

Moderate

High

High

Low

High

Memoitems:

ExposuretoChina(exportstoChina%oftotalexports)

N/A

4%

24%

19%

13%

13%

21%

12%

37%

18%

TradebalancewithChina(%ofGDP)

N/A

-3%

0%

1%

3%

-7%

18%

-6%

5%

0%

Source:Haver,MorganStanleyResearch;Note:*IndiahaslargerexposuretotheUSviaservicesexportsthangoodsexports,andweestimateahighershareof37%ofgoodsandservicesexports.

Whoismoreexposed?Inthisscenario,economieswithhigherexposuretotheUSwouldbeJapan,Korea(fordetails,seeSouthKorea:ImpactofPotentialUSDemandSlowdownonKorea,7Aug2024),andTaiwan.ForChina,itsexposuretotheUSmayhavereducedbutremainsrelativelyhighandthestartingpointofweakdomesticdemandmeansit

needsexportsasagrowthengine.ForIndia,itsexposuretotheUSwouldarisemorefromservicesexportsratherthangoodsperse.However,itwouldalsoseethetailwindsfromitsstrongstructuralgrowthstoryactingasamitigatingfactortothegrowthdownside.

ForAustraliaandIndonesia,whilethedirectexposureislow,therewillbeindirecteffectsarisingfromweakercommodityprices.

Moreratescutsandfiscaleasingcouldprovidepartialoffset:IftheUSentersadeeperslowdown,theFedwouldlikelydeliveralargermagnitudeofratecutsthanwehave

penciledinourbasecase.OurchiefglobaleconomistSethCarpenternotedthattheFedcouldcutratestoitsownestimateofneutral(i.e.,2.8%)inthisscenario.AspolicyratesdifferentialswiththeUSwouldmovemorerapidlyinfavorofAsia,itwouldthenleave

roomforAsiancentralbankstodelivermoreratecutsandprovidesomegrowthoffset.Inthisscenario,centralbanksinthemoreexposedeconomieslikeKoreaandTaiwanor

economiesthathavehigherratesatthestartingpointlikeIndonesia,PhilippinesandIndia

couldcutratesbymorethanweexpectinourbasecase.Wealsoexpectpolicymakerstotakeupmoderatefiscaleasing,whichwillhelpkeeptheoveralldownsidetogrowth

manageable.Tobesure,thefiscalspaceissomewhatlimitedgiventhatfiscaldeficits

currentlyarestillhigherthanpre-Covidlevelsforsevenoutof10economiesintheregion.SpecificallyforChina,wedonotexpectabigcountercyclicalpolicyresponsetoin

responsetoslowdowninUSexportsandhenceitwillalsoprovidelessofasupporttotheregion.

Exhibit19:RoomformonetaryeasingwillopenupastheFedbeginstocut

7

Nominalpolicyratedifferentialvs.US(%)

6

MSf'cast

5

4

3

2

1

0

-1

-2

APXJexChinaAPXJ

-3

Dec-00

Dec-02

Dec-04

Dec-06

Dec-08

Dec-10

Dec-12

Dec-14

Dec-16

Dec-18

Dec-20

Dec-22

Dec-24

Source:Haver,MorganStanleyResearchforecasts

Exhibit20:Centralbankswithhigherratesatthestartingpoint…

3.52.9

NominalratedifferentialwithUS(%)

India

Indonesia

Philippines

Australia

Korea

Malaysia

Thailand

Taiwan

China

Japan

CurrentDec-25

1.9

1.6

1.1

0.90.9

0.0

-0.6

-0.9

-1.0

-1.9

-1.9

-2.1

-2.3

-2.4

-2.9

-3.1

-3.4

-3.7

-5.1

2.51.50.5-0.5-1.5-2.5-3.5-4.5-5.5

Source:Haver,MorganStanleyResearchforecasts

Morganstanley

RESEARCH

Idea

Exhibit21:…Orthemoreexposedeconomiescouldcutratesbymorethanweexpect

RealratedifferentialwithUS(%,on12Mfwdinflation)1.51.0

CurrentDec-25

0.40.40.5

0.5

Indonesia

Philippines

India

Korea

Thailand

Malaysia

China

Australia

Taiwan

Japan

-0.4

-0.7

-0.8

-1.0-1.0

-1.1

-1.3

-2.1-2.1

-2.3

-2.3

-2.4

-2.4

-2.8

-3.8

-5.0

-0.5-1.5-2.5-3.5-4.5-5.5

7

Source:Haver,MorganStanleyResearchforecasts

Exhibit22:Roomforfiscaleasinglimitedgivenstillwidefiscaldeficits

Generalgovernmentfiscalbalance(%ofGDP)

1.8%0.2%0.1%

-0.1%

1% -1% -3% -5% -7% -9%-11%-13%-15%

-4.5%-4.4%-3.9%

-3.4%-3.4%-3.0%-2.8%-3.9-.0%-3.6%-2.2%-2.5%

-7.2%

-7.7%

20192024E

-12.9%

-14.2%

Source:CEIC,MorganStanleyResearchforecasts;Note:*Chinaasaugmentedfiscaldeficit,**Indiaasconsolidatedgovernmentdeficit.

MorganStanleyResearch7

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Idea

8

RiskScenario#2:AUSRecession

Potentialcontractioninexports:IftheUSentersarecession,weseesignificantdownsidetoAsia’sgrowthoutlook.Bothtechandnon-techexportsarelikelytoslowunderthis

scenario.Thiswillalsospillovertothecapexcycle,giventhehistoricaltightlinkages

betweenexportsandcapexinAsia.InthepastthreeUSrecessions,USrealimportsandUSrealgoodsPCEdeclinedbyanaverageof14.1%and9%frompeaklevels,respectively.Accordingly,Asia’srealexportsalsoslowedby14.9%frompeaktotrough.

Exhibit23:WhathappenedduringpastUSrecessions

Source:CEIC,MorganStanleyResearch;Note:*DataforAsiaexportsnotavailable.

Financialconditionswilltightenmeaningfully:InaUSrecession,therisk-offsentimentcouldleadtoabroad-basedtighteninginfinancialconditionsintheformofweakerequitymarketperformanceandastrongerdollar,atleastintheinitialperiodoftherecession.

GiventhegenerallyhighcorrelationbetweenUSandAsianassetmarkets,thiswouldleadtotighterfinancialconditionsinAsiatoo.

PolicyresponsefromAsiaexChinawillnotbeameaningfuloffset:WhilewecouldseeanevenlargermagnitudeinFedratecutsthaninthedeeperUSslowdownscenario,theheightenedFXvolatilityandgenerallystrongerdollarcouldleadAsiancentralbankstotakeapauseandfocusonFXstabilitybeforeresumingcuts.Moreover,thepolicy

responseisunlikelytobesufficientincompletingoffsettingthegrowthdrag.

TheoffsetfromChina’scounter-cyclicalpolicyresponsewillbeevenlesserinthis

cycle:Post-2008,Chinaactedasakeyoffsetaspolicymakerstookupaggressiveeasingtosupportitsdomesticdemandwhilealsoemergingasakeysourceofenddemandfortherestoftheregion.However,theeconomyisfacingmuchbiggerstructuralchallenges.ThestartingpointofwideaugmentedfiscaldeficitsandhighdebttoGDPratiosmeanthat

thereislessroomforanaggressivecounter-cyclicalresponse.Thepersistentdebt

deflationchallengemeanthatwedonotexpectChinatoplaythesamecountercyclical

supportroleasbefore.Eveniftheydotakeupmeaningfulstimulus,itwillbeimportanttowatchwhetheritwillbemoreofthesamesupply-centricpoliciesoriftheypivotto

boostingconsumption.Aswehavearguedbefore,supply-centricpolicieswillexacerbatedeflationarypressuresbothinandoutsideofChinaandmayactasanadditionaldrag.ThekeytopullingChinaoutofthedebt-deflationloopwillbefiscaleasingthatisfocusedonliftingconsumptiongrowth.Thesmallstepstakensofardonothintatsuchamajor

policyshift.

stro

Morganstanley

RESEARCH

Idea

Exhibit24:Chinahastendedtorunacountercyclicalgrowthmodelofsupportinggrowthwhenexternaldemandisweak

40

30

20

10

0

-10

-20

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

ChinadebttoGDPdelta

Chinaexportvalue(%YoY)(RS)

40%

30%

20%

10%

0%

-10%

-20%

2008

Source:CEIC,MorganStanleyResearchestimates;Note:ExportsdataasYTD.

Exhibit25:However,unlikein2008-09,fiscalpolicyroominChinaismorelimitednow

3%AugmentedFiscalBalance,%ofGDP

-2%

-7%

-12%

-17%

-22%

-2.4%

-5.7%

-12.4%

-13.1%-12.9%

-13.4%

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024E

2025E

Source:CEIC,WIND,MorganStanleyResearchforecasts

Exhibit26:DebttoGDPismuchhigherascomparedtobefore

350

300

250

200

150

100

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024E

2025E

ChinaDebttoGDPRatio,%

312

303

181

155

140

320

Source:CEIC,MorganStanleyResearchforecasts

Exhibit27:Withoutapivotfromsupply-centricpolicyresponse,deflationarypressureswillpersistandcontinuetoweighon

nominalGDPgrowth

ChinanominalGDP(%Y)

14%

12%

10%

8%

6%

4.0%

4%

2%

Jun-13

Jun-14

Jun-15

Jun-16

Jun-17

Jun-18

Jun-19

Jun-20

Jun-21

Jun-22

Jun-23

Jun-24

Source:CEIC,MorganStanleyResearch

MorganStanleyResearch9

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DisclosureSection

InformationandopinionsinMorganStanleyResearchwerepreparedoraredisseminatedbyoneormoreofthefollowing,whichacceptresponsibilityforitscontents:MorganStanleyAsiaLimited,and/orMorganStanleyAsia(Singapore)Pte.(Registrationnumber199206298Z)and/orMorganStanleyAsia(Singapore)SecuritiesPteLtd(Registrationnumber200008434H),regulatedbytheMonetaryAuthorityofSingapore(whichacceptslegalresponsibilityforitscontentsandshouldbecontactedwithrespecttoanymattersarisingfrom,orinconnectionwith,

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GlobalResearchConflictManagementPolicy

MorganStanleyResearchhasbeenpublishedinaccordancewithourconflictmanagementpolicy,whichisavailableat/institutional/research/conflictpolicies.APortugueseversionofthepolicycanbefoundat.br

ImportantDisclosures

MorganStanleyisnotactingasamunicipaladvisorandtheopinionsorviewscontainedhereinarenotintendedtobe,anddonotconstitute,advicewithinthemeaningofSection975oftheDodd-FrankWallStreetReformandConsumerProtectionAct.

MorganStanleyResearchdoesnotprovideindividuallytailoredinvestmentadvice.MorganStanleyResearchhasbeenpreparedwithoutregardtothecircumstancesandobjectivesofthosewhoreceiveit.MorganStanleyrecommendsthatinvestorsindependentlyevaluateparticularinvestmentsandstrategies,andencouragesinvestorstoseektheadviceofafinancialadviser.Theappropriatenessofaninvestmentorstrategywilldependonaninvestor'scircumstancesandobjectives.Thesecurities,instruments,orstrategiesdiscussedinMorganStanleyResearchmaynotbesuitableforallinvestors,andcertaininvestorsmaynotbeeligibletopurchaseorparticipateinsomeorallofthem.MorganStanleyResearchisnotanoffertobuyorsellorthesolicitationofanoffer