M UpdateChina Economics | Asia PacificMacro Webcast: Soft Start to 2024 amid Persistent DeflationMorgan Stanley Asia LimitedRobin XingChief China Economist Robin.Xing@morganstanley.com +852 2848-6511 Zhipeng CaiEconomist Zhipeng.Cai@morganstanley.com +852 2239-7820 Morgan Stanley appreciates your support in the 2024 Institutional Investor All-Asia Research Team Survey. Request your ballot here. Related reports:China Economics: Deflation Persists (17 Jan 2024)For important disclosures, refer to the Disclosure Section, located at the end of this report.January 21, 2024 08:37 PM GMTM Update2M UpdateMorgan Stanley Research3M Update4M UpdateMorgan Stanley Research5M Update64Deflation PersistsChina is undergoing the longest and deepest deflation since 1998-99……led by industrial sector amid housing and LGFV deleveragingSource: NBS, Morgan Stanley Research estimates-4-20246810Dec-96Dec-97Dec-98Dec-99Dec-00Dec-01Dec-02Dec-03Dec-04Dec-05Dec-06Dec-07Dec-08Dec-09Dec-10Dec-11Dec-12Dec-13Dec-14Dec-15Dec-16Dec-17Dec-18Dec-19Dec-20Dec-21Dec-22Dec-23Dec-24GDP Deflator (%)2Q98-4Q99: 7 quarters2Q-3Q09:2 quarters3Q-4Q15:2 quarters2Q23-2Q24E:5 quarters2Q20:1 quarter-10%-6%-2%2%6%10%14%18%Dec-19Dec-20Dec-21Dec-22Dec-23GDP Deflator, YoY%TertiaryIndustryPrimary IndustrySecondary IndustryOverallM UpdateMorgan Stanley Research75Broad-based Slowdown in 4Q23Travel and service activities were the main dragsSubpar income growth; faded revenge consumptionSource: Haver, Morgan Stanley Research estimates-25%-20%-15%-10%-5%0%5%10%15%20%25%TransportationPropertyConstructionHotels andCateringManufacturingNominal GDP, QoQ SAAR3Q234Q2320%10%-10%20%30%40%Dec-18Mar-19Jun-19Sep-19Dec-19Mar-20Jun-20Sep-20Dec-20Mar-21Jun-21Sep-21Dec-21Mar-22Jun-22Sep-22Dec-22Mar-23Jun-23Sep-23Dec-23Household Income and Consumption, QoQ SAARConsumptionDisposable IncomeM Update86Rising Risks of Broadening Deleveraging Trend to HouseholdsContinued slippage in corporate revenue growth may prompt the corporate sector to cut wage growthSource: CEIC, Wind, Morgan Stanley Research 1Q24E:~3.123456789101112Mar-19Sep-19Mar-20Sep-20Mar-21Sep-21Mar-22Sep-22Mar-23Sep-23Mar-24Wage growth proxyNominal GDP growthYoY%We remain below consensus for 2024 growth4.24.44.6MSConsensus among MajorBrokers (Nov 2023)Consensus among MajorBrokers (Jan 2024)2024 China Real GDP ForecastM UpdateMorgan Stanley Research97Weakening Housing Sales New home sales in 50 cities slowed visibly in the first two weeks of 2024Existing home sales in 10 cities continued to soften amid price headwindsSource: CREIS, Mysteel, Digital Cement, Morgan Stanley Research010,00020,00030,00040,00050,00060,00070,00080,000JanFebMarAprMayJunJulAugSepOctNovDec20202021202220232024Weekly Primary Sales in 50 Cities (4WMA, units)05,00010,00015,00020,00025,000Jan-19Mar-19May-19Jul-19Sep-19Nov-19Jan-20Mar-20May-20Jul-20Sep-20Nov-20Jan-21Mar-21May-21Jul-21Sep-21Nov-21Jan-22Mar-22May-22Jul-22Sep-22Nov-22Jan-23Mar-23May-23Jul-23Sep-23Nov-23Jan-24Level4 Week Moving AverageWeekly Secondary Sales in 10 Cities (Units)M Update108Budget Expansion Offs...
