Morgan Stanley | China Musings | Asia Pacific
Summaries are public. PDF access requires an active membership; all members have the same access. Sign in
Renewed geopolitical tensions in the Middle East have reignited the narrative surrounding China's potential gains in global export market share. However, Morgan Stanley argues that a full repetition of the pandemic-era export boom remains unlikely. During the pandemic, China's global export share surged by two percentage points, driven by early virus containment and rapid industrial recovery. While the current energy shock could structurally boost demand for energy security, electrification, and supply chain resilience, China is positioned to directly capture share in the "New Three" sectors: electric vehicles, solar cells, and lithium batteries.
Nevertheless, several factors will constrain overall gains. Unlike the pandemic, the current disruption is an energy-driven supply constraint that elevates input costs and compresses global real income, thereby shrinking the overall demand pie. As a net energy importer with a 2025 energy deficit accounting for 1.8% of GDP, China faces significant margin pressure across midstream and downstream industries. Morgan Stanley estimates that China would need an additional 0.9 percentage points of export market share simply to stabilize external demand at pre-shock levels. The realistically achievable range falls between 0.3 and 0.9 percentage points. Consequently, while share gains may buffer the economic impact, they cannot fully offset weakening demand and deteriorating terms of trade.