Investment Rating - The report does not explicitly state an investment rating for the industry Core Insights - Supply-side reform in China is evolving, focusing on mid-to-downstream sectors rather than solely on upstream sectors as in previous reforms [2] - The current reform approach is more nuanced and balanced, addressing advanced capacity rather than outdated capacity [2] - The report anticipates a slowdown in China's real GDP growth to below 4.5% in the second half of 2025 due to diminishing export momentum and fiscal easing [11] Summary by Sections Supply-Side Reform - The current supply-side reform is characterized as "new wine in an old bottle," emphasizing the importance of demand for economic reflation [2] - The targeted sectors have shifted from SOE-dominated to POE-dominated firms, indicating a change in ownership dynamics [2] Economic Growth - China's real GDP growth is projected to decline to less than 4.5% in the latter half of 2025, influenced by fading export growth and fiscal easing measures [11] - The economy is expected to remain on a slow reflation path, indicating ongoing challenges in achieving robust growth [11] Housing Market - The housing market continues to face challenges, with elevated inventory levels in lower-tier cities and a persistent decline in housing prices [21] - The National Development and Reform Commission (NDRC) is considering expanding funding channels to address housing inventory issues, which may depend on various factors including funding size and developer selection [22] Fiscal Policy - The fiscal space in China is becoming more constrained, with major tax revenues and land sales underperforming against budget expectations [38][43] - The report suggests that China needs not only new stimulus measures but also a reformed growth algorithm to address structural issues in the economy [44] Reflation Strategy - The report outlines a "5R" reflation strategy, which includes measures such as expanding fiscal deficits, monetary easing, and social welfare spending to stimulate consumption [47] - The strategy aims for a gradual and uneven progress towards economic recovery, with various policy measures expected to be implemented by the end of 2025 [47]

June 30, 2025 01:16 AM GMT Investor Presentation | Asia Pacific M Foundation China Economics: Solid 2Q, Softening Momentum, Fall Stimulus Likely Related Reports: Solid 2Q, Softening Momentum, Fall Stimulus Likely (26 June 2025) Morgan Stanley Asia Limited Robin Xing Chief China Economist Robin.Xing@morganstanley.com +852 2848-6511 Zhipeng Cai Economist Zhipeng.Cai@morganstanley.com +852 2239-7820 For important disclosures, refer to the Disclosure Section, located at the end of this report. M Fall Stimulus S ...

May 12, 2025 10:40 AM GMT Investor Presentation | Asia Pacific 20% 20% 34% tariff hikes by 90 days 3% 3% 125% 10% 125% 10% 0% 20% 40% 60% 80% 100% 120% 140% 160% Innitial Plan Current Level Initial Plan Current Level US Tariff Hike on China China Tariff Hike on the US US-China Tariff Hike in 2025 (Exemptions not Considered) Feb-Mar 25 Apr-25 Fentanyl related tariff Reciprocal tariff Tit-for-tat tariffs 107% 71% 61% 45% 11% 22% 34% 59% 123% 40% 0% 20% 40% 60% 80% 100% 120% 140% Jan-25 Feb-25 Mar-25 Apr 2, 20 ...

Morgan Stanley Asia Limited Robin Xing Chief China Economist Robin.Xing@morganstanley.com +852 2848-6511 Jenny Zheng, CFA Economist Jenny.L.Zheng@morganstanley.com +852 3963-4015 May 11, 2025 09:41 PM GMT Investor Presentation | Asia Pacific M Foundation Growth Pain Beneath the Surface Related reports: Growth Pain Beneath the Surface (9 May 2025) Direct Tariff Impact Mitigated by Rerouting (9 May 2025) For important disclosures, refer to the Disclosure Section, located at the end of this report. M Possible ...

Investment Rating - The report does not explicitly state an investment rating for the industry Core Insights - The Politburo has pledged to coordinate domestic policy and implement existing policies more aggressively, including faster issuance of government bonds and potential cuts to the reserve requirement ratio (RRR) and policy rates [3] - Real GDP growth is projected to soften, with 2Q real GDP tracking at less than 4.5% year-on-year [4] - Persistent deflationary pressures are noted, with a significant decline in container throughput to the US due to tariffs [7][8] - Household sentiment regarding consumption is weakening, driven by concerns over job security and salary amidst US tariff hikes [12] - The property market sentiment has cooled, with increased expectations of price declines and a rise in eager sellers [16] Policy Measures - The report outlines specific measures such as unemployment insurance rebates to exporters, a new relending facility for service consumption, and increased funding support for consumer trade-in programs [3] - A supplementary fiscal package of RMB 1-1.5 trillion is expected in the second half of 2025, alongside enhanced infrastructure and tech investment support [40] - The government is expected to implement a consumption-focused fiscal package of RMB 10 trillion over the next two years [49] Economic Indicators - The report indicates that 36% of the 2025 government bond quota has been utilized, compared to an average of 20% in the past five years [44] - Local government special refinancing bond net issuance is reported at RMB 1.5 trillion out of a total of RMB 2 trillion for local government debt swaps [47] - The US weighted average tariffs on China's exports are projected to remain high, with trade-weighted tariff hikes reduced to 34% with exemptions [22][24]