Morgan Stanley warned that the market should not overexpect China to repeat the inflationary cycle (reflation) of 2015-18, as the current deflationary issues faced by the economy are fundamentally different in origin and structure. The institution pointed out that more than 70% of the deflationary pressure reflected in the Producer Price Index (PPI) today comes from non-commodities, far higher than the 36% during the 2015-16 cycle, indicating that supply-side excess has spread to emerging industries. The capacity in these industries is mainly owned by the private sector and is difficult to cut through administrative orders. In addition, with factors such as debt, demographics, and external geopolitical issues continuing to weigh on the demand side, the previous supply-side reform remedies will be insufficient.
Source: Morgan Stanley ("China Insights: Can the Movement Against 'Involution' Work?", for detailed content, please see the "Caijing Atlas" knowledge planet)
Original: https://www.toutiao.com/article/1839267137213448/
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