Morgan Stanley Fixed-Asia Economics The Viewpoint How Big of a Deflationary For...-106209047

MJanuary29,202409:44PMGMTIdeaAsiaEconomicsAsiaPacificMorganStanleyAsiaLimited+8522239-7812+656834-8272TheViewpoint:HowBigofaChetanAhyaDeflationaryForceWillChina+8522848-5652Be?ChiefAsiaEconomistChetan.Ahya@morganstanley.comDerrickYKamAsiaEconomistDerrick.Kam@morganstanley.comJonathanCheungEconomistJonathan.Cheung@morganstanley.comAnelevatedinvestmenttoGDPratioincreasesexcesscapacityMorganStanleyappreciatesyoursupportinanddeflationarypressures.GivenChina’soutsizedroleinglobalthe2024InstitutionalInvestorAll-Asiagoodsmanufacturing,webelievecompetitivepressureswillriseResearchTeamSurvey.Requestyourballotanddeflationarypressureswillpersist,whichcouldheightenhere.tradetensions.KeyTakeawaysChina’sinvestmentratioremainselevatedat41%ofGDP.Thisisresultinginexcesscapacityandweighingonpricesacrosssectors.Chinaaccountsfor29%ofglobalmanufacturinganditsdeflationaryimpulsewillbefeltelsewhere.Thisdeflationaryimpulseishelpingtoeaseinflationarypressurefornow,buttheyriskposingachallengeforpolicymakerslateron.Risingcompetitionwillpressuremargins,especiallyinsectorswhereChinahasanoutsizedmarketshare.Thepersistenceoftheseissuescouldleadtoariseintradetensions.Exhibit1:ChinahassizablemarketshareinmultiplekeyproductsChinatop10exportproductsbyvalue:globalexportshareineachproductin2022HouseholdAppliances59%LithiumIonBatteriesCellPhone...