Morgan Stanley(US:MS)2025-05-08 01:49Investment Rating - The report indicates a cautious outlook for the Chinese economy, with expectations of a GDP growth slowdown of 1 percentage point in Q2 2025 due to high tariffs and insufficient policy support [1][2]. Core Insights - The report emphasizes that the high level of tariffs has limited further increases, and the focus of policy responses will gradually shift from investment in emerging industries and urban renewal to consumer spending in the medium term [1][2]. - It is anticipated that the actual GDP growth rate will slow to below 4.5% in Q2 2025, down from 5.4% in Q1 2025, primarily due to the impact of tariffs and moderate policy responses [15][16]. Summary by Sections Tariff Assumptions - The report posits that while tariffs may decrease, they will remain at high levels, with the effective tariff rate expected to stabilize around 45% [2][6]. - If tariffs remain at current levels, the GDP growth forecast for the year could decline by an additional 0.5 percentage points [2][12]. Policy Expectations - The report outlines that the policy response will be moderate, with a focus on supply-side measures rather than aggressive stimulus, reflecting a cautious approach by policymakers [14][15]. - There is an acknowledgment of the need for a shift towards consumer-oriented policies, but uncertainties regarding their multiplier effects are causing hesitation in implementation [14][15]. Economic Projections - The report forecasts that the actual GDP growth rate will further decline to 3.7% by Q4 2025, with nominal GDP growth expected to fall below 3% [16][17]. - The anticipated economic slowdown is attributed to the cumulative effects of high tariffs and the gradual implementation of supportive policies [15][16].