Morgan Stanley | China Watch: Macro Concerns and Tech Focus
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Morgan Stanley's China Watch argues policy is oriented toward faster execution of the existing budget rather than 'bazooka' stimulus. Following the July 30 Politburo meeting, housing provident fund (HPF) loan limits were raised; Beijing further relaxed purchase restrictions on August 7; Shanghai cut second-home down payments to 15% and expanded interest subsidies on August 20. An August 21 briefing stressed fiscal-monetary coordination and faster issuance of local government special bonds (LGSBs) and new policy-based financial instruments, while the August 28 national investment work conference pressed local governments on accountability, major projects and 'six-network' initiatives. August 2026 credit rules tighten developer financing—closed-loop lead-bank fund management per project, land-acquisition loans still banned—while easing mortgages: debt-service-to-income caps rise from 55% to 60% and tenors extend from 30 to 40 years, with repayment ratios still below 50%. The two-speed economy persists: exports are sturdy (strong Korean first-20-day August shipments; firmer US, euro-area and Japan manufacturing PMIs), but consumption, cement and rebar demand, home sales and industrial profits—softening since 2Q26 on the energy shock and weak domestic demand—lag. Slow government bond issuance implies weak Q3 infrastructure capex; more property support is expected in H2, and August's US CPI report should further confirm cooling inflation. No ratings or targets are given.