Name: Morgan Stanleys Xing on China data
Uploaded: 2025-12-15T07:58:00.430Z
Duration: 4 min 9 s
Description: Chief China Economist Robin Xing explains why China must rebalance its social safety net to boost consumer spending. He speaks after China released fresh data on retail sales and home prices.

Chief China Economist Robin Xing explains why China must rebalance its social safety net to boost consumer spending. He speaks after China released fresh data on retail sales and home prices.

Beijing

Robin Xing, Chief China Economist at Morgan Stanley, commented on recent Chinese economic data, describing it as 'soft' and below economists' expectations. Real GDP growth for the fourth quarter is tracking at 4.5%, with nominal GDP growth below 4%, raising concerns among investors, particularly due to weak consumption and a struggling property sector.

Xing noted that policy responses remain cautious, with the government focusing on advanced manufacturing and technology rather than significant stimulus. For 2026, Morgan Stanley projects real growth at 4.8% and nominal growth at 4.1%, both below consensus. Xing highlighted the need for expanded trade-in programs, housing market stabilization, and improved social welfare to support consumption and economic rebalancing.

Morgan Stanley's Xing on China data

It seems like just from a glance, this is missing the median estimate of really what we've been expecting from economists there. So certainly that is in some ways there a bit of a disappointment. Let's bring in Robin Xing, Chief China Economist here at Morgan Stanley, to tell us a bit more about your takeaway from these numbers, Robin. It's soft. Fourth quarter is tracking at probably in real term 4.5% below the third quarter's 4.8. But what matters more for investors is nominal GDP growth, which is tracking at a very subdued level of below 4% given these numbers you mentioned. I think consumption is the biggest concern. Retail sales are slowing because the trading effects are diminishing, and also property is a big drag. You know, inventory is high, broader price declines, fragile confidence in property. However, you can see policy in cruise control at this moment. Yes. Why do you think there's a lack of urgency? I would say for the full year, they achieved 5%. And from the CWC, the Work Conference, the key message is to continue to focus on advanced manufacturing, on tech innovation. So it looks like for next year, that's the key message. There is a small nudge to domestic demand, but it's probably not enough. So how are you looking at 2026 now? Is it going to be much challenging given the fact that you say 5% is pretty attainable for 2025? So we are running at 4.8% in real growth for 2026 and 4.1% in nominal growth. That's our expectation. And again, it's below consensus on nominal GDP. So it's another year of slow burn for reflation in China. The reason is, if you look at the policy makers, fiscal envelope is likely to remain flat versus 2025. I mean, of course, they may allocate a little bit more from that flat deficit to something like domestic demand, consumption, but it's still quite a modest pace. And on property, the key message here is guardrails over bailouts. So far, all these evidence showed they are less interested in a big rescue plan, be it inventory purchase or nationalizing developers. More likely, if the stress deepens, you can provide a little bit subsidy on mortgages. All of these are showing for next year, policy will remain reactive and small. The consumption side is still, as you mentioned, I mean, that's quite a miss, right? For 1.3% for retail sales. There is some chatter, I guess, from the Work Economic Conference about optimizing the trade in programs. What would that entail? Do you think that would mean Beijing is willing to increase funding or just kind of keep things from slowing down further? Well, you are right. There is a lot of precautionary saving due to this incomplete social safety net in China. So to get consumption back on a firmer footing, they need three things. Cyclically, they can do trade in programs, widening the coverage of category of goods. Services. Exactly. Probably some services, vouchers. But meanwhile, they have to stabilize housing sector. So again, that subsidy on mortgage interest rates, which your colleagues reported about three weeks ago. How effective would that be? I think it's going to be a stabilizer. It's not going to reflect in prices that much because it depends on the duration, the magnitude and how they communicate this subsidy. But if they do it, at least it's going to make the cycle smoother, probably shortening the painful period of inventory digestion. But the last but not least, social welfare. We mentioned that the incomplete social safety net. That's the key reason why consumers, even farmers, migrant workers are saving, not spending. So they have to provide that injection from central government budget to farmers and the migrant workers' social welfare accounts. So if they deliver all three things, I think it's going to anchor a reflation and a rebalance in China.

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