Investment Rating - The report does not provide a specific investment rating for the RMB or related assets Core Insights - The RMB is unlikely to appreciate significantly due to persistent deflationary pressures and the need for accommodative monetary policy [6][9] - Historical parallels between Japan's currency appreciation in the 1980s and the current situation in China are drawn, but the report argues that the RMB will not follow the same path [3][6] - Significant RMB appreciation would exacerbate deflation rather than alleviate it, and sustainable economic rebalancing requires more than just currency appreciation [6][10] Summary by Sections Currency Appreciation and Trade Tensions - Currency appreciation alone is insufficient to resolve complex trade tensions between the US and China, which involve multiple issues beyond currency [10][11] - Historical instances of RMB appreciation did not lead to a narrowing of China's trade surplus with the US [12][13] Deflationary Pressures - China is currently facing intense deflationary pressures, and significant currency appreciation would further harm corporate profits and aggregate demand [23][25] - The report highlights that exporters, particularly SMEs, would suffer from translation losses due to currency appreciation [24][25] Economic Rebalancing - Achieving sustainable economic rebalancing in China requires structural changes in growth models rather than just currency appreciation [41][42] - Policymakers in China prefer investment-driven growth, which complicates the shift towards consumption-led growth [41][42] Historical Context - Japan's experience with currency appreciation in the 1980s led to a loss of export competitiveness and did not result in sustainable economic rebalancing [32][46] - The report emphasizes that Japan's currency appreciation did not lead to a significant increase in private consumption as a share of GDP [54][53]

Key takeaways from our recent client conversations around the world. June 30, 2025 04:01 AM GMT Global Economic Briefing | North America M Idea The Weekly Worldview: The Hardest Questions: From Beijing to Berlin M A good friend of mine likes to say that the main reason that he forecasts is to find out why he was wrong. Our view of a meaningful deceleration in the US and the global economy from tariffs and other policies has yet to play out. We find ourselves waiting. So, while we wait, we take stock of the ...

June 23, 2025 11:47 AM GMT Investor Presentation | Asia Pacific M Foundation Lingering Deflation Despite Tariff Detente Morgan Stanley Asia Limited Robin Xing Chief China Economist Robin.Xing@morganstanley.com +852 2848-6511 For important disclosures, refer to the Disclosure Section, located at the end of this report. M Tariffs De-escalated, Challenges Remain 2025 GDP to sustain at 4.5%, with less tariff shock than seen before May 12th … 1.5 0.0 0.1 1.3 1.4 1.3 0.2 1.2 0.9 2.0 1.9 1.8 5.0 4.5 4.2 -2 -1 0 1 ...

Economic Outlook - The most recent data suggests a continuation of a soft landing, which is good news for the economy [2] - The economy was in a good position to absorb the stagflationary shock from tariffs, and the Fed was in a restrictive position [3] - Concerns exist regarding oil prices potentially offsetting disinflation in other parts of the economy [5] Tariffs and Inflation - Evidence of tariffs impacting inflation is present in recent reports, with appliances and commodity goods prices increasing [4] - $70 billion of tariffs have been collected, indicating that someone is bearing the cost [4] - The impact of tariffs on inflation is uncertain, with a divided outlook on whether it will be a one-off event or cause broader inflation [6] Federal Reserve Policy - The Fed is likely to lower rates in the coming months [1] - The Fed should wait and see before cutting rates, despite pressure, to avoid cutting into a bigger inflation problem [6] - The Fed is being cautious, and the downside of waiting is small [7] - Financial markets will likely price in easing before the Fed delivers it if stagnation worsens [8] - The Fed's transparency provides a release valve against being behind the curve, as markets will front-run easing [9]

Investment Rating - The report does not explicitly provide an investment rating for the industry Core Insights - The report discusses three significant changes in the industry: US-China trade negotiations, the partial suspension of China's consumer goods trade-in programs, and the acceleration of social welfare reforms in China, while highlighting that deflation remains a persistent macroeconomic issue [1][2][13] Summary by Sections US-China Trade Negotiations - The London trade talks represent a key advancement following the Geneva meeting where the US and China agreed to pause tariffs, although challenges remain due to differing expectations on non-tariff measures [2] - A Framework Agreement was established to implement the Geneva trade deal and utilize the bilateral economic consultation mechanism [2][3] - The scope of the London agreement appears limited, focusing primarily on non-tariff measures without significant US concessions beyond student visas [3] Consumer Goods Trade-in Programs - China has partially suspended its consumer goods trade-in programs due to the exhaustion of allocated trade-in funding in some regions, with Rmb162 billion already distributed out of a Rmb300 billion quota [4] - The rapid utilization of funds and the impact on retail sales indicate potential limitations of such stimulus measures, reminiscent of the US Cash-for-Clunkers program [8] - Despite these challenges, the report anticipates a modest expansion of the annual quota if economic growth declines [8] Social Welfare Reforms - China has released a blueprint aimed at enhancing the social welfare system, focusing on equal access to public services and addressing healthcare and elderly care concerns [9][10] - The reforms are characterized as gradual, with a focus on improving existing frameworks rather than implementing radical changes [10][11] - The report suggests that while some measures have been implemented, the overall pace of reform may be slow due to structural challenges and external pressures [11][13]

[Music] Greetings everyone. It is uh in the know day as well employment Friday uh and uh we have a lot to discuss as usual we'll we'll go through fiscal policy monetary policy economic indicators market indicators and uh we'll talk a little bit about uh some real breakthroughs in terms of uh the market recognizing how much innovation is taking place. Um so uh starting w with fiscal policy and I'll I'll go through and and just uh make a few observations before we flip to charts.So um on fiscal policy, well t ...

folks are underestimating and underrealizing the benefits at this stage of what's going to come out of the AI revolution and how it's ultimately going to benefit people's availability of products, cost of goods, access to things. So the counterbalancing force Jcal is deflationary which is let's assume that the cost of everything comes down by half. That's a huge relief on people's need to work 60 hours a week. Suddenly you only need to work 30 hours a week and you can have the same lifestyle or perhaps even ...

Inflation and Deflation Trends - Industry experts predict a new inflation cycle in China due to M2 scale reaching 326.06 trillion yuan, which is double the GDP, but currently, deflation is observed with April CPI rising only 0.3% [1] - From June 2025, five major price drops are anticipated in China [3] Real Estate Market - Since 2022, housing prices have been on a downward trend, with cities like Tianjin and Shijiazhuang experiencing declines, and major cities like Shanghai seeing significant adjustments, with prices dropping from 95,000 yuan per square meter to 65,000 yuan, a decrease of over 30% [5] - By the second half of 2025, housing price differentiation is expected, with second and third-tier cities slowing their decline while first-tier cities like Shanghai and Shenzhen may experience further drops [5] Seafood Prices - Seafood prices are becoming more affordable, with prices for king crabs dropping below 200 yuan each and salmon prices decreasing by 40%, while shrimp prices fell from 38 yuan per jin to 28 yuan per jin [7] - The decline in seafood prices is attributed to consumer hesitance following Japan's nuclear wastewater discharge, leading to reduced demand despite no contamination in domestic seafood [7] Automotive Market - A price reduction trend is observed in the domestic automotive market, with mid-range cars dropping by 15,000 to 20,000 yuan and luxury imports seeing reductions up to 100,000 yuan [9] - Factors contributing to the decline include an influx of new energy vehicles, increased competition from tech companies like Huawei and Xiaomi, and reduced consumer purchasing power [9] Home Appliance Prices - Home appliance prices are expected to adjust downwards by 10% to 15% for items like refrigerators, TVs, and air conditioners by 2025 [12] - The rapid technological advancement in appliances and decreased consumer spending due to lower incomes are driving the need for discounts and promotions to clear inventory [12] Pork Prices - Pork prices are decreasing, with supermarket prices dropping from 26-28 yuan per jin to 18-20 yuan per jin, and further declines are expected [13] - The price drop is due to overproduction from previous years' high prices attracting investment in pig farming and a shift in consumer preference towards healthier meat options [13]

May 20, 2025 06:44 PM GMT China Economics Mid-Year Outlook Lingering Deflation Despite Tariff Detente We revise our 2025 GDP forecast upward by 30 bps to 4.5% due to reduced tariff headwinds. But deflation persists, as structural issues (housing, consumption) continue to exert downward pressure on prices. We expect lighter, delayed stimulus focused on infrastructure. Milder growth slowdown amid lower tariffs: 2025/26 GDP growth raised to 4.5%/4.2% YoY (vs. 4.2%/4.0%Y previously). We now see GDP YoY stabiliz ...

Trade re-routing likely muted the impact of US tariffs on total Chinese exports 11 May 2025 | 10:49PM HKT China: Three things in China Three quick highlights from China: 240 220 200 180 160 140 120 100 80 60 240 120 100 80 60 140 160 180 200 220 Chinese exports nominal level by destination (seasonally adjust 19 20 21 22 23 24 25 ed) US Japan EU ASEAN LatAm Africa Others (mostly EM) Index (2019=100) Index (2019=100) Source: China Customs, Goldman Sachs Global Investment Research n Another deflation print: Bo ...