Morgan Stanley Investor Presentation: Asia Pacific — A Selective Win for Chinese Exports
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Morgan Stanley's latest investor presentation argues that while Chinese exports are benefiting from Middle East disruptions, the gains represent a selective win rather than a pandemic-era boom. Export share growth is projected to contribute only 0.3 to 0.9 percentage points to growth in 2026, significantly lower than the 1.5 percentage points seen in 2020. This moderation reflects a smaller global demand pie, worsening terms of trade, and persistent margin pressures. Although first-quarter GDP surprised on the upside, driven by front-loaded infrastructure spending and robust exports, second-quarter momentum is expected to soften.
The energy shock presents a nuanced impact, boosting headline inflation while further pressuring industrial margins depending on whether the underlying driver is cost-push or demand-pull. Industrial profit growth in January and February 2026 was supported by global demand tied to AI and the green transition. Meanwhile, March semiconductor exports remained strong, though labor-intensive goods softened post-Lunar New Year. Broad credit demand remained anemic, with new short-term and long-term household loans falling well below their five-year averages, pushing household credit growth to historic lows. Finally, regarding AI diffusion, the report draws historical parallels from past innovation waves, noting that while productivity will improve, labor displacement may prove transitional, requiring robust education, retraining, and proactive policy responses.