摩根士丹利：中国：剩下的三个问题

Industry Investment Rating - The report does not explicitly provide an overall industry investment rating [1][2][3][4][5] Core Views - The report highlights three key remaining issues in China's economy: demand shortfall, fiscal challenges, and the debate between investment and consumption [4] - Recent policy easing measures are expected to help stabilize the property market but face challenges in boosting prices and restoring demand [4] - The property sector's drag on demand will likely result in economic growth falling short of targets [4] - Over-reliance on investment to fill demand gaps may lead to persistent overcapacity and deflationary pressures [4] - Consumption is a viable alternative growth driver but measures to boost it have been limited so far [4] Property Market Analysis - Recent property easing measures may help prevent further price declines but property activity will continue to drag on economic growth [12] - The property market tone shift is seen as meaningful support for sustained improvement in home sales [12] - Housing inventory remains high with 43 million units in primary and secondary markets and 8 million units under construction [12] - Inventory reduction will take considerable time given the current sales run rate of 8 million units annually [12] - Reducing new housing construction will further weigh on property fixed asset investment and create additional demand gaps [13] Fiscal Situation - Fiscal expansion is constrained by deflationary pressures and already high public debt levels [21] - Land sale revenues have shrunk by about one-third since 2021 peak, putting pressure on local government finances [22] - Tax revenue growth has slowed significantly, with 3-month average growth at -5.9% in August compared to 6.2% average in 2016-19 [22] - A supplementary budget of RMB 1-2 trillion is expected to be approved, potentially expanding the augmented fiscal deficit by 1.6% of GDP [27] Growth Composition Debate - Over-reliance on investment as a growth driver continues to create overcapacity and exacerbate deflationary pressures [30] - China's investment-to-GDP ratio at 41% is significantly higher than Japan's 32% in 1993 [30] - GDP deflator has averaged -0.6% over the past five quarters, worse than Japan's +1.6% in 1990-94 [30] - Shifting to consumption-driven growth could help alleviate deflationary pressures and normalize nominal GDP growth [31] Economic Indicators - Manufacturing and infrastructure FAI grew at 8% and 6.2% respectively, while property FAI declined by 10.2% [17] - Retail sales growth was 2.1%, significantly lower than investment growth rates [17] - Industrial, infrastructure and service loans increased by RMB 7.6 trillion since Q2 2019, offsetting RMB 6.4 trillion decline in property loans [17]