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					                                                             MORGAN             STANLEY               RESEARCH
                                                             ASIA/PACIFIC


                                                             Morgan Stanley Asia Limited            Helen Qiao
                                                                                                    Helen.Qiao@morganstanley.com
                                                                                                    +852 2848 6511

                                                                                                    Yuande Zhu
                                                                                                    Yuande.Zhu@morganstanley.com
                                                                                                    +852 2239 7820

                                                                                                    Yin Zhang
September 3, 2013                                                                                   Yin.Zhang@morganstanley.com
                                                                                                    +852 2239 7818


China Economics
Growth Stabilization Helps
Acupuncture-Style Reform                                     China: Summary of economic forecasts
                                                                                                    New forecast               Previous
                                                                                           2012
                                                                                                     2013    2014    2015    2013       2014
                                                             GDP real growth %, YoY           7.7      7.6     7.1     6.9     7.6        7.6
                                                                Consumption                   8.2      7.6     7.3     7.0     7.8        7.6
                                                                GCF                           8.2      8.5     7.7     7.5     8.2        8.3
We believe growth stabilization in the near term will              GFCF                       9.9      9.2     8.1     7.8     9.1        8.8
                                                                   Inventory                -20.1     -8.0    -4.0    -3.0   -12.0       -6.0
offer a favorable backdrop for policy makers to              Contribution to GDP, ppts
                                                                Consumption                   4.1      3.8     3.6     3.5     3.9        3.8
continue to roll out acupuncture-style reform                   GCF                           3.9      4.0     3.6     3.6     3.9        3.9
measures. In the aftermath of the liquidity crunch in the       Net Exports                  -0.2     -0.2    -0.1    -0.1    -0.2       -0.2
                                                             Foreign Trade
interbank market in June, downside risks from the recent        Exports (% YoY)              7.9       6.6     5.8     8.2     7.3       9.8
                                                                Imports (% YoY)              4.3       7.0     6.6     9.0     7.1       9.5
tightening in financial conditions are being offset by a        Trade balance, USD bn      231.1     240.2   238.6   241.3   250.9     282.8
                                                             Current Account, % of GDP       2.3       2.2     1.8     1.7     2.4       2.2
more growth-friendly policy stance in the short term.        CPI                             2.6       2.6     1.8     2.0     2.6       2.0
                                                             Policy Rate (eop)              6.00      6.00    5.50    5.25    6.00      6.00
                                                             USD/CNY (eop)                   6.3       6.2     6.1     5.9     6.1       5.9
Rather than a silver bullet, we expect multiple              Fiscal Deficit, % of GDP       -1.5      -2.1    -2.0    -1.0    -2.1      -2.0
                                                             Source: CEIC, Morgan Stanley Research F = Morgan Stanley Research Forecasts
“silver needles”, entailing sector-specific measures,
especially on the supply side. China’s new leaders           Our base, bull and bear case forecasts
have initiated multiple reform measures in various areas               Base           2010    2011    2012 2013F 2014F 2015F
to help cut administrative red tape, promote SMEs, and       Real GDP (% chg yoy)     10.4     9.3     7.7     7.6      7.1    6.9
                                                             CPI (% chg yoy)           3.3     5.4     2.6     2.6      1.8    2.0
boost investment in railways, environment protection                   Bull
and energy conservation. While the 3rd Plenary of the        Real GDP Growth (%)                               7.7      7.3    7.5
                                                             CPI (% chg yoy)                                   2.6      3.0    2.9
CPC will roll out a full agenda of reforms for the next 10             Bear
                                                             Real GDP Growth (%)                               7.0      5.8    6.3
years, we believe that needle therapy will likely continue   CPI (% chg yoy)                                   1.5     -2.0    0.2
to improve resource allocation and increase efficiency       Source: CEIC, Morgan Stanley Research F = Morgan Stanley Research
                                                             Forecasts
gradually.

There is clear evidence that the top policy makers
have shifted recently towards a more balanced
policy position to implement reforms as well as
countercyclical policy adjustments. We view this as a
positive development, as past experience suggests both
short-term growth stabilizing measures and long-term
structural adjustments are needed to achieve a smooth
and orderly debt-reduction process.

We maintain our above-consensus annual GDP
growth forecast of 7.6% YoY for 2013, trim our 2014
GDP forecast to 7.1% (from 7.6% YoY), and set our
2015 forecast at 6.9%. We maintain our long-held view
that China will achieve the government’s annual growth
target of 7.5% this year. However, headwinds will likely
strengthen in the next two years in view of the mild
recovery in DM demand, the need for deleveraging in
the corporate sector and the time lag for the effects of
reform measures to kick in.
                                                             For important disclosures, refer to the
                                                             Disclosures Section, located at the end of
                                                             this report.
                                                                                                                                                            MORGAN             STANLEY              RESEARCH

                                                                                                                                                            September 3, 2013
                                                                                                                                                            China Economics




Growth Stabilization Helps Acupuncture-Style Reform
1. Growth to stabilize in 2H2013                                                                                                                            The growth target of 7.5% appears likely to be reached
                                                                                                                                                            this year. Despite our concerns that financial conditions have
Financial conditions started to ease shortly after the
                                                                                                                                                            yet to return to the accommodative levels of last May, both
liquidity crunch in the inter-bank market in late June.
                                                                                                                                                            top-down and bottom-up data confirm manufacturing activities
Since the period of interbank liquidity shortage in late June, the
                                                                                                                                                            are on the mend, having rebounded from the beginning of
PBOC has so far refrained from high-profile easing (e.g., cut in
                                                                                                                                                            3Q13. For example, high-frequency electricity production
interest rate or RRR), which is in line with our expectations
                                                                                                                                                            growth and steel prices suggest growth bottomed out recently
(China Economics: Reading the Policy Tea Leaves (6-13):
                                                                                                                                                            (see Exhibit 2), adding to the improvement in PMI readings.
Liquidity to Remain Tight in the Short Term, but There Is a
“Plan B”, June 24, 2013). With more liquidity injected into the                                                                                             Exhibit 2
system at the short end, short-term funding costs have finally                                                                                              Both top-down and bottom-up data show
come down from the peak levels in late June (see Exhibit 1).                                                                                                acceleration in manufacturing activities
Exhibit 1                                                                                                                                                                                Steel price (HRC, RMB/Ton)
                                                                                                                                                                  RMB/Ton                                                                yoy %
Short-term funding costs have come down from                                                                                                                       5000                  Electricity production (yoy %, RHS)                 80
recent peak levels                                                                                                                                                 4800
                                                                                                                                                                                                                                                60
 %                                  Banker's Acceptance Bill Discount Rate                                                                                         4600
                                    Banker's Acceptance Bill Transfer Discount Rate                                                                                4400
 14                                                                                                                                                                                                                                             40
                                                                                                                                                                   4200
 12                                                                                                                                                                4000                                                                         20
                                                                                                                                                                   3800
 10
                                                                                                                                                                                                                                                0
                                                                                                                                                                   3600
  8
                                                                                                                                                                   3400
                                                                                                                                                                                                                                                -20
  6                                                                                                                                                                3200
                                                                                                                                                                   3000                                                                         -40
  4                                                                                                                                                                      01-   01-    01-    01-    01-    01-     01-     01-    01-    01-
                                                                                                                                                                        Jan-   Jul-   Jan-   Jul-   Jan-   Jul-    Jan-    Jul-   Jan-   Jul-
  2                                                                                                                                                                      09     09     10    10      11    11       12      12     13     13

  0                                                                                                                                                         Source: Bloomberg, Morgan Stanley Research
      2010-01

                2010-04

                          2010-07

                                    2010-10

                                              2011-01

                                                        2011-04

                                                                  2011-07

                                                                            2011-10

                                                                                      2012-01

                                                                                                2012-04

                                                                                                          2012-07

                                                                                                                    2012-10

                                                                                                                              2013-01

                                                                                                                                        2013-04

                                                                                                                                                  2013-07




                                                                                                                                                            Our proprietary indicator shows clear acceleration in
                                                                                                                                                            growth momentum. The combination of a more
Source: CEIC, Morgan Stanley Research
                                                                                                                                                            growth-friendly policy stance and restocking orders from firm
Top policy makers’ reassurance that this year’s growth                                                                                                      growth in infrastructure and property investment fostered a
target would be achieved also boosted confidence levels.                                                                                                    clear improvement in growth momentum in July. Our coincident
To dispel confusion about the government’s growth target,                                                                                                   proprietary indicator, MS-CHEX, showed a marked rebound in
Premier Li Keqiang expressed confidence in achieving the                                                                                                    the July reading, mostly because of the pickup in electricity
economic targets set out by the Central Economic Working                                                                                                    production and real imports (see Exhibit 3; see also our report,
Meeting, namely 7.5% growth in real GDP (see China                                                                                                          “China Deleveraging: Shallow-U, Deep-U or W?” dated
Economics Macro Policy Update (10-13): Premier Li Reiterated                                                                                                September 3, 2013, for details on the launching of MS-CHEX).
Policy Flexibility at “Upper/Lower Bounds”, July 17, 2013). This
was later confirmed by President Xi Jinping during a politburo
meeting in late July.




                                                                                                                                                                                                                                                      2
                                                                           MORGAN                  STANLEY                       RESEARCH

                                                                           September 3, 2013
                                                                           China Economics




Exhibit 3                                                                  The possibility of EM macro instability could prove to be a
MS-CHEX traces a clear acceleration in growth                              drag on China’s economic growth in the coming months.
momentum                                                                   Potentially, further policy tightening and currency depreciation
       yoy%
                                                                           in emerging markets could weaken China’s exports to these
     50                                                                    countries as well as divert third-party business away from
                      IP      MS-CHEX                                      China through loss of competitiveness. Even though Brazil,
     40
                                                                           Russia, India, South Africa and ASEAN economies account for
     30                                                                    less than 20% of China’s total exports, they represented about
                                                                           36% of headline export growth recently (see Exhibit 4). The EM
     20
                                                                           economic cycle is looking fragile at this time, adding to the
     10
                                                                           uncertain outlook for China’s growth in the coming quarters.

       0                                                                   Exhibit 4
                                                                           Potential EM macro instability may prove to be a
     -10
                                                                           drag on China’s growth in the coming months
     -20
        2005   2006    2007    2008     2009   2010   2011   2012   2013                                            Exports to ASEAN & BRIS*
                                                                                  %
                                                                                   45
Source: CEIC, Morgan Stanley Research                                                           Percentage contribution to headline exports YoY growth (12ma)
                                                                                   40
                                                                                                % share in total exports (12ma)
                                                                                   35
2. But the rebound will unlikely last very long
                                                                                   30
China will probably have to face a lower trend growth level                        25
and stronger headwinds in the next two years. Our analysis                         20
on the long-term trend in China’s potential growth shows a                         15
gradual deceleration over the next decade partly because of a                      10
less favorable outlook for the demographic dividend (see China                      5
Economics: Asia Insight: Assessing China's current slowdown
                                                                                    0
and long-term potential growth, July 20, 2012). In addition, we                      2005        2006        2007       2008      2009   2010   2011   2012   2013

believe further headwinds from sector over-capacity and                         *BRIS= Brazil, Russia, India, and South Africa

excess leverage in the system will likely tip the risks to the
                                                                           Source: CEIC, Morgan Stanley Research
downside on growth in 2014-15, especially in view of the time
lag for the effects of the reform measures to be felt.                     Second, the probability of China introducing another policy
                                                                           stimulus package as in 2008–09 is low. We believe policy
We do not expect the current growth rebound to be                          makers are fully aware of the potential downside of an
long-lasting against a modest recovery in global demand and                investment boom fueled by aggressive monetary easing and
especially in the absence of major policy stimulus.                        will refrain from high-profile easing unless they have no other
                                                                           options.
First, while we think global GDP growth will gradually improve
from 2.9% in 2013 to 3.5% in 2014, this cautiously optimistic              3. We adjust our macro forecasts for 2013–14 and
view is underscored by our concerns about higher real interest             introduce our 2015 forecasts
rates and a deeper divide between EM and DM economies
                                                                           We maintain our above-consensus headline GDP growth
(see “Back-to-School Global Macro Outlook: Acceleration,
                                                                           forecast of 7.6% for 2013, trim our 2014 growth forecast to
Stabilisation and Accommodation,” dated September 2, 2013).
                                                                           7.1%, and set the 2015 forecast at 6.9% (see Exhibit 5). On a
The improving growth prospects in DM economies have
                                                                           quarterly basis, we expect QoQ sequential growth to rebound
already triggered fears of less accommodative monetary
                                                                           in 2H13, aided by restocking orders from infrastructure and
policies recently, which weighs heavily on the EM growth
                                                                           property investment, before slowing again in 1H14 when the
outlook.
                                                                           policy effect is likely to taper off. Yet in YoY terms, growth will
                                                                           probably decline modestly to 7.5%, from 7.6% in 1H13,
                                                                           because of last year’s high base.




                                                                                                                                                                     3
                                                                                        MORGAN        STANLEY      RESEARCH

                                                                                        September 3, 2013
                                                                                        China Economics




Exhibit 5                                                                               We think a shallow U-shaped deleveraging process is the most
Forecasts – summary                                                                     likely outcome. As deleveraging gets under way, we expect
                                        New forecast                   Previous
                              2012
                                         2013    2014     2015       2013       2014
                                                                                        economic growth to slow. There is clear evidence that the top
GDP real growth %, YoY           7.7       7.6     7.1      6.9        7.6        7.6   policy makers have shifted towards a more balanced policy
   Consumption                   8.2       7.6     7.3      7.0        7.8        7.6
   GCF                           8.2       8.5     7.7      7.5        8.2        8.3   stance recently to implement both reforms and countercyclical
      GFCF                       9.9       9.2     8.1      7.8        9.1        8.8   policy adjustments (China Economics: Macro Policy Update
      Inventory                -20.1      -8.0    -4.0     -3.0      -12.0       -6.0
Contribution to GDP, ppts                                                               (12-13): Politburo meetings confirm commitment to growth
   Consumption                   4.1       3.8      3.6     3.5        3.9        3.8
   GCF                           3.9       4.0      3.6     3.6        3.9        3.9
                                                                                        target, July 31, 2013). We view this as a positive development
   Net Exports                  -0.2      -0.2     -0.1    -0.1       -0.2       -0.2   as past experience suggests both short-term growth stabilizing
Foreign Trade
   Exports (% YoY)               7.9      6.6      5.8      8.2       7.3         9.8
                                                                                        measures and long-term structural adjustments are needed to
   Imports (% YoY)               4.3      7.0      6.6      9.0       7.1         9.5   achieve a smooth and orderly debt-reduction process.
   Trade balance, USD bn       231.1    240.2    238.6    241.3     250.9       282.8
Current Account, % of GDP        2.3      2.2      1.8      1.7       2.4         2.2
CPI                              2.6      2.6      1.8      2.0       2.6         2.0   5. A favorable backdrop for “acupuncture-style”
Policy Rate (eop)               6.00     6.00     5.50     5.25      6.00        6.00
USD/CNY (eop)                    6.3      6.2      6.1      5.9       6.1         5.9   reform to continue
Fiscal Deficit, % of GDP        -1.5     -2.1     -2.0     -1.0      -2.1        -2.0
Source: CEIC, Morgan Stanley Research   F = Morgan Stanley Research Forecasts           A stable macro environment would be more conducive to a
                                                                                        program of gradual reforms. In recent years, the view that “only
Rebalancing towards “good” investment and away from                                     crisis can make reforms happen” seems to have become
consumption. The government’s sector-specific policy                                    increasingly popular, based on China’s previous experience
measures introduced recently appear to be aimed at diverting                            with reforms in the 1980s and 1990s – which tended to emerge
resources away from the areas suffering from over-capacity,                             from periods of significant macro instability. Although we admit
and toward environment protection, railways, broadband                                  the presence of powerful interest groups could make the
infrastructure, and reconstruction of run-down areas. Our GDP                           implementation of reforms even more challenging, we still
by expenditure forecasts largely reflect our view that, while the                       argue for the case of gradual reforms in a stable macro
pace of overall investment growth will moderate, it is unlikely to                      environment. We believe that efficiency enhancement through
decelerate sharply (see Exhibit 5).                                                     reforms does not have to be a product of widespread economic
                                                                                        dislocations in today’s much more mature and larger economy.
Our CPI inflation forecasts are unchanged at 2.6% YoY for
2013 and cut to 1.8% for 2014. We expect CPI inflation to                               Our expectation is not for a silver bullet but for many silver
spike up slightly in 3Q13 as weather-related factors boost food                         needles, in an acupuncture-style reform. China’s new leaders
prices, before easing again in 4Q13. Meanwhile, PPI deflation                           have initiated multiple reform measures in various areas to help
will likely ease gradually both sequentially and in YoY terms in                        cut administrative red tape, promote SMEs, and boost
2H13. Since the CPI inflation target is around 3.5%, the                                investment in railways, environment protection and energy
monetary authorities would likely take advantage of the muted                           conservation. The State Council and other ministries have
inflationary pressure to make potential policy adjustments if                           rolled out 21 reform measures to more than nine sectors in the
economic growth decelerates unexpectedly.                                               last two months (see Exhibit 6). While the 3rd Plenary of the
                                                                                        CPC will introduce a full agenda of reforms for the next 10
4. Policy remains the key to achieving a smooth                                         years in November, we believe that the needle therapy will
deleveraging process                                                                    likely continue to improve resource allocation and increase
China ultimately has to address the structural imbalance in the                         efficiency in the near term.
investment-fueled and state-led growth model by initiating a
debt reduction process. Since 2008, China has accumulated
considerable leverage in the corporate sector after three waves
of investment expansion. The key problem is the slower
productivity gains in recent years, which failed to boost the
growth in equity to match that for liabilities. In a separate report
also published today, we analyze the possible shapes of the
growth trajectory during deleveraging molded by the range of
policy options available and external demand outcomes (see
“China Deleveraging: Shallow U, Deep U, or W?”).




                                                                                                                                                           4
                                                                                       MORGAN          STANLEY         RESEARCH

                                                                                       September 3, 2013
                                                                                       China Economics




Some policy easing may take place next year. To ease the pain                          Rmb6.1 and Rmb5.9 previously. We introduce our forecasts for
during deleveraging, we expect two cuts of 25bps each in                               the USD1/Rmb exchange rate for the end of 2015 at Rmb5.9.
benchmark interest rates in 2014, one of 25 bps in 2015, and a                         We think policy makers will likely allow a slower pace
potentially higher fiscal deficit in 2014.                                             of renminbi appreciation when EM currencies are under
                                                                                       pressure and to ease the pain during deleveraging.
We have revised our USD/Rmb forecasts to Rmb6.2 and
Rmb6.1 at the end of 2013 and 2014, respectively, from


Exhibit 6
The State Council and other ministries have rolled out 21 reform measures since late June
                Recent Major Policies (June - August)                         Target                                  When to start     Affected sectors
                The State Council released the plan on urban shanty areas 3 million units housing in 2013 and 10                        Real estate and
26-Jun                                                                                                                Already started
                reconstruction.                                           million units in five years                                   construction
                                                                                                                                        Energy intensive and
                The State Council issued measures to prevent air
14-Jun                                                                        To boost clean energy development       Gradually         highly polluted sectors;
                population and promoted solar energy development.
                                                                                                                                        clean energy
                The PBOC abolished lending rates' lower bound -- 70% of
20-Jul                                                                        Market driven loan pricing mechanism    Immediately       Banks
                the benchmark rate.
                The State Council proposed to procure public services from To promote private investment in public                      Service and infrastructure
31-Jul                                                                                                             Gradually
                social forces and strengthen urban infrastructure.         service sector                                               construction
                Small and micro enterprises with monthly sales lower than
1-Aug           RMB 20,000 will be temporarily exempt from VAT and            RMB30 bn tax relief                     Immediately       Small businesses
                business tax starting from August.
                China expanded its value-added tax system to
                                                                                                                                        Transportation and
1-Aug           transportation and certain service sectors nationwide to      RMB120 bn tax relief                    Already Started
                                                                                                                                        service sectors
                replace prior business tax.
                The State Council issued a guideline to accelerate the
                                                                              By 2015, the total output value to RMB                    Energy-saving and
11-Aug          development of energy-saving and environmental                                                       Gradually
                                                                              4.5 trn                                                   environmental protection
                protection industries.
                The State Council announced a guideline on financial
                supports to small and micro companies. The growth of
                                                                              More financing and lower financing
12-Aug          credit granted to small businesses should outpace the total                                           Already started   Small businesses
                                                                              costs for small businesses
                credit growth, and the increment should be larger than that
                in the previous year.

                                                                              By 2015, information consumption
                The State Council released opinions to boost information      RMB 3.2 trn, annual growth rate above                     IT and
14-Aug                                                                                                              Gradually
                consumption.                                                  20%, the spillover effect to related                      telecommunications
                                                                              sectors more than RMB1.2 trn
                The State Council released a national broadband
                development strategy to promote the construction of           By 2015, national coverage ratio to                       IT and
17-Aug                                                                                                                Gradually
                broadband infrastructure, as a supporting policy to boost     reach 50%                                                 telecommunications
                information consumption.
                The State Council released a guideline on railway
                investment and financing system to accelerate the             To promote private investment in state-
19-Aug                                                                                                                Gradually         Railway sector
                development of the nation’s railway sector, encouraging       dominated monopoly sector
                private investment in the railway sector.
                                                                              To boost the trade and service
                State Council officially approved Shanghai Free Trade
22-Aug                                                                        integration, and a pilot programme to   Already started   Trade and finance sector
                Zone.
                                                                              test further financial liberalization
                The State Council proposed to develop health-service
                                                                              To encourage private and overseas                         Medical and health care
29-Aug          industries to help improve people's livelihoods and provide                                           Gradually
                                                                              investment in the health-service sector                   sector
                more job opportunities.
                The State Council decided to push forward credit asset        To improve the efficiency of credit     In coming
29-Aug                                                                                                                                  Banks
                securitization programme.                                     asset utilization                       months
Source: Morgan Stanley Research




                                                                                                                                                                     5
                                                                                            MORGAN            STANLEY            RESEARCH

                                                                                            September 3, 2013
                                                                                            China Economics




Risks to our forecasts                                                                      ii.     Bull case: We also assign a 20% probability to a growth
                                                                                                    rebound that lasts longer than we forecast in our base
i.    Bear case: We assign a 20% probability to our bear case,
                                                                                                    case. If a full set of reforms is announced at the 3rd Plenum
      in which QE withdrawal combined with a severe shock to
                                                                                                    of the 18th CPC in November and quickly implemented
      China’s economic growth has a significantly negative
                                                                                                    from the end of the year, the impact of the acupuncture
      impact. In this scenario, the expectation of an imminent
                                                                                                    reforms would likely kick in sooner than in our base case.
      rate hike following the US Federal Reserve’s QE tapering
      pushes up the US bond yield to 4% in the next few months,                             Exhibit 7
      triggering further capital outflow from EM and macro                                  Baseline forecasts vs. Bull and Bear cases
      instability in a wide range of EM countries. In the bear case,                                    Base             2010       2011        2012     2013F     2014F     2015F
      domestic policy in China may fail to stabilize growth either                              Real GDP (% chg yoy)     10.4        9.3         7.7      7.6       7.1       6.9
                                                                                                CPI (% chg yoy)           3.3        5.4         2.6      2.6       1.8       2.0
      because of the sharp drop in external demand in                                                    Bull
      combination with an unintended policy tightening or failure                               Real GDP Growth (%)                                        7.7       7.3      7.5
      of one or multiple financial institutions under regulatory                                CPI (% chg yoy)                                            2.6       3.0      2.9
                                                                                                         Bear
      scrutiny in the domestic market. We do not consider such                                  Real GDP Growth (%)                                        7.0      5.8       6.3
      events as being very likely or close to our base case.                                    CPI (% chg yoy)                                            1.5      -2.0      0.2
      However, if they occur, they could cause the economy to                               Source: CEIC, Morgan Stanley Research          F = Morgan Stanley Research Forecasts

      stall, raising the unemployment rate rapidly along with
      increasing the risks of deflation.



Exhibit 8
Summary of Key Macroeconomic Indicators
                                              2006      2007       2008         2009    2010       2011     2012    2013F       2014F        2015F
Real GDP Growth (%, YoY)                      12.8      14.3        9.6          9.1    10.4        9.3      7.7       7.6         7.1          6.9
  Consumption                                  9.7      10.9        8.5          9.3     9.0       10.8      8.2       7.6         7.3          7.0
  GCF                                         13.3      14.4       10.8         19.1    11.9        9.4      8.2       8.5         7.7          7.5
Contribution to Growth (ppt)
  Consumption                                   5.1       5.6        4.2          4.6     4.5        5.3      4.1        3.8         3.6         3.5
  GCF                                           5.5       6.0        4.5          8.1     5.5        4.4      3.9        4.0         3.6         3.6
  Net Exports                                   2.1       2.6        0.9         -3.5     0.4       -0.4     -0.2       -0.2        -0.1        -0.1
Structure of Economy (%)
GDP                                          100.0     100.0      100.0         100.0   100.0      100.0   100.0       100.0    100.0         100.0
  Consumption                                 51.5      50.0       49.5          49.6    49.0       49.6    49.9        49.9     50.0          50.0
  GCF                                         41.7      41.8       42.2          46.1    46.7       46.8    47.0        47.4     47.7          47.9
  Net Exports                                  6.7       8.2        8.3           4.3     4.3        3.6     3.1         2.7      2.4           2.1
Key Pricing Data (%, YoY)
  CPI                                           1.5       4.8        5.9         -0.7     3.3        5.4      2.6        2.6         1.8         2.0
  PPI                                           3.0       3.1        6.9         -5.4     5.5        6.0     -1.7       -1.8        -1.5         1.6
  GDP Deflator                                  2.3       4.0        6.4         -3.1     4.4        5.7      0.5        0.4         0.1         1.8
Growth Indicators (%, YoY)
  Industrial Production                       16.6      18.5       12.9          11.0    15.7       13.9    10.0         9.2      8.6           8.4
  Fixed Asset Investments                     24.5      25.8       26.1          30.5    24.5       23.8    20.6        19.5     18.5          18.8
  Retail Sales                                13.7      16.8       21.6          15.5    18.4       17.1    14.3        12.5     12.0          12.2
  Exports                                     27.2      26.0       17.2         -16.0    31.3       20.3     7.9         6.6      5.8           8.2
  Imports                                     19.9      20.8       18.5         -11.2    38.8       24.9     4.3         7.0      6.6           9.0
  Trade Balance (USD bn)                     177.5     264.3      298.1         195.7   181.5      154.9   231.1       240.2    238.6         241.3
Key Policy Variables
  Policy Interest Rate (%, eop)               6.12       7.47      5.31          5.31    5.81       6.56    6.00        6.00     5.50           5.25
  USD/CNY Exchange Rate (eop)                 7.81       7.30      6.83          6.83    6.62       6.30    6.29        6.15     6.10           5.95
Current Account as % of GDP                    8.3       10.1       9.0           5.1     4.0        1.9     2.3         2.2      1.8            1.7
Fiscal Balance as % of GDP                    -1.0        0.2      -0.8          -2.8    -2.5       -1.8    -1.5        -2.1     -2.0           -1.0

Source: CEIC, Morgan Stanley Research   F = Morgan Stanley Research Forecasts




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