M UpdateGlobal Insights Day 2024 | Asia PacificAsia Economics: Is India the New China?Morgan Stanley Asia LimitedChetan AhyaChief Asia Economist Chetan.Ahya@morganstanley.com +852 2239-7812 Morgan Stanley appreciates your support in the 2024 Institutional Investor All-Asia Research Team Survey. Voting will open early January 2024. For important disclosures, refer to the Disclosure Section, located at the end of this report.January 4, 2024 08:24 AM GMTM Update2Chetan AhyaChief Asia EconomistM UpdateMorgan Stanley Research3Source: CEIC, Haver, Morgan Stanley Research forecastsAsia’s growth outlook: Still on a path of asynchronous recoveryIndia: Sustaining robust domestic demandChina: A sub-par growth recovery in 20246.05.34.04.20123456720192020-21 avg2022-23 avg2024EChina real GDP growth (%Y)4.61.56.86.401234567820192020-21 avg2022-23 avg2024EIndia real GDP growth (%Y)M Update4Source: CEIC, UN forecasts, Haver, WIND, Morgan Stanley Research forecastsChina – The economy faces renewed headwinds from the 3D challenge of debt, demographics and deflationInvestment to GDP ratios have been kept higher than warranted given weakening demographics Excess investment has led to leveraging up in property developers and local government balance sheets18 23 28 28 31 34 37 41 47 52 55 59 65 64 64 64 65 65100107115115124131134148158151139135139127132137137136375052 494954 606165 67 70 758989 95 101107111155181194 193205219231250270 271264 269293 281 2913023083120501001502002503003502008200920102011201220132014201520162017201820192020202120222023E2024E2025EHouseholdNon-financial CorporatesGovernmentCChina Debt to GDP Ratio, %40.9%-0.01%-0.4%0.0%0.4%0.8%1.2%1.6%20%25%30%35%40%45%50%19911993199519971999200120032005200720092011201320152017201920212023China GFCF % of GDPPopulation growth (%Y, RS)M UpdateMorgan Stanley Research5China – Battling the deflation challengeRebalancing toward consumption is key to sustaining moderate levels of inflation of 2-3%Source: CEIC, Morgan Stanley Research forecastsWe expect a gradual path of modest reflation-1.4%-2%0%2%4%6%Jun-17Jun-18Jun-19Jun-20Jun-21Jun-22Jun-23Jun-24China GDP deflator (%Y)MS f'cast39.4%30%32%34%36%38%40%42%44%46%48%50%19911993199519971999200120032005200720092011201320152017201920212023China private consumption to GDP M Update6China – Watching for risks of household balance sheet deleveragingEven property prices in tier 1 cities have declined amid the wider property sector downturnSource: CEIC, Morgan Stanley Research estimatesContinued decline in property prices could lead to deleveraging in household sector balance sheet65.1%30%35%40%45%50%55%60%65%70%Nov-14Nov-15Nov-16Nov-17Nov-18Nov-19Nov-20Nov-21Nov-22Nov-23China household debt to GDP-20%-15%-10%-5%0%5%10%15%20%25%30%Nov-18Feb-19May-19Aug-19Nov-19Feb-20May-20Aug-20Nov-20Feb-21May-21Aug-21Nov-21Feb-22May-22Aug-22Nov-22Feb-23May-23Aug-23Nov-23Residential property price index (%Y)BeijingShanghaiShenzhenGuangzhouM UpdateMorgan Stanley Research7Source: CMIE, Haver, India budget documents, Mo...
