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The 3Ds

Aug 21, 2023

Morgan Stanley summarizes the key risks facing the Chinese economy as the 3Ds – demographics, deflation and debt. A lot has been written about Chinese demographics being the result of State policies. The current economic data coming out of China is not reassuring while debt levels are unsustainably high. We draw three conclusions: 1/ Chinese authorities will need to intervene quickly and firmly to avoid a deflationary debt spiral 2/ the problems at the property developer Country Garden Holdings are worrisome after the default of China Evergrande and 3/ central banks globally should listen as disinflationary forces will spread from China to all its trading partners in the developed world. The 3Ds in China will keep us busy over the coming months.

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