# Presentation: 448716

- Charts to Accompany:
***A Wake-Up Call for the US and China:***
***Stress Testing a Symbiotic Relationship***
*Stephen S. Roach*
*Chairman*
*Morgan Stanley Asia*
- Presented before
- The US-China Economic and Security Review Commission
- of the
- US Congress
- Hearing on
- “China’s Role in the Origins of and Response to the Global Recession”
- February 17, 2009
- Washington, DC

## Figure 1:  Global Imbalances

*Source: IMF and Morgan Stanley Research*

**This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.**
**This material was not prepared by the Morgan Stanley research department.  Please refer to important information and qualifications at the end of this material.**

- Absolute Sum of Current Account Balances

- (as % of World GDP)

- 1

- 2

- 3

- 4

- 5

- 6

- 7

- 70

- 72

- 74

- 76

- 78

- 80

- 82

- 84

- 86

- 88

- 90

- 92

- 94

- 96

- 98

- 00

- 02

- 04

- 06

- 08e

- 1

## Figure 2:  Chinese Export Surge

*Source: China National Bureau of Statistics and Morgan Stanley Research*

**This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.**
**This material was not prepared by the Morgan Stanley research department.  Please refer to important information and qualifications at the end of this material.**

- China Exports as % of GDP

- 0

- 5

- 10

- 15

- 20

- 25

- 30

- 35

- 40

- 52

- 55

- 58

- 61

- 64

- 67

- 70

- 73

- 76

- 79

- 82

- 85

- 88

- 91

- 94

- 97

- 00

- 03

- 06

- 2

## Figure 3:  The Great Boom in Global Trade

*Source: IMF, Morgan Stanley Research*

**This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.**
**This material was not prepared by the Morgan Stanley research department.  Please refer to important information and qualifications at the end of this material.**

- 3

- Global Exports as % of Global GDP

- 10

- 15

- 20

- 25

- 30

- 35

- 40

- 80

- 82

- 84

- 86

- 88

- 90

- 92

- 94

- 96

- 98

- 00

- 02

- 04

- 06

- 08

- %

## Figure 4:  Export-Led Developing Asia

*Source: IMF, Morgan Stanley Research*

**This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.**
**This material was not prepared by the Morgan Stanley research department.  Please refer to important information and qualifications at the end of this material.**

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- 15

- 20

- 25

- 30

- 35

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- 86

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- 90

- 92

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- 96

- 98

- 00

- 02

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- Exports

- Consumption

- as % of GDP

## Figure 5:  US Consumption Binge

*Source: Haver Analytics, Morgan Stanley Research*

**This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.**
**This material was not prepared by the Morgan Stanley research department.  Please refer to important information and qualifications at the end of this material.**

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- 59

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- 63

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- 73

- 50

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- 90

- 95

- 00

- 05

- US Personal Consumption Expenditures

-   (as a % of GDP)

- Average: 1975-2000

## Figure 6:  US Labor Income Shortfall 

*Source: Bureau of Economic Analysis, Morgan Stanley Research*

**This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.**
**This material was not prepared by the Morgan Stanley research department.  Please refer to important information and qualifications at the end of this material.**

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## Figure 7:  US Wealth Shock 

**This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.**
**This material was not prepared by the Morgan Stanley research department.  Please refer to important information and qualifications at the end of this material.**

*Source: OFHEO, Federal Reserve, Morgan Stanley Research*

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- -6

- 0

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- 12

- 18

- 24

- 92

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- -1

- 0

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- House Price Index (left)

- Net equity extraction as a % disposable income (right)

- % YoY

- 4Q MA

## Figure 8:  America’s Saving Shortfall

*Source: US Bureau of Economic Analysis, Morgan Stanley Research*

**This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.**
**This material was not prepared by the Morgan Stanley research department.  Please refer to important information and qualifications at the end of this material.**

-  US Net National Saving Rate
-  (as % of Gross National Income)

- -4

- 0

- 4

- 8

- 12

- 16

- 60

- 64

- 68

- 72

- 76

- 80

- 84

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- 92

- 96

- 00

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- 08

- 8

## Figure 9:  The Global Consumer

***Source:**** National Sources, UN, Morgan Stanley Research*

**This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.**
**This material was not prepared by the Morgan Stanley research department.  Please refer to important information and qualifications at the end of this material.**

- 9

- Personal Consumption: 2007

- 0

- 2000

- 4000

- 6000

- 8000

- 10000

- 12000

- US

- EU-15

- Japan

- China

- India

- US$ billions

- Germany

## Figure 10:  Chinese Consumption Shortfall 

*Source: China National Bureau of Statistics and Morgan Stanley Research**	**	**	**	**	**	*

**This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.**
**This material was not prepared by the Morgan Stanley research department.  Please refer to important information and qualifications at the end of this material.**

- 10

- China: Personal Consumption as a % of GDP

- 30

- 40

- 50

- 60

- 70

- 80

- 52

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## Disclosures

- .** **

- This communication is not a product of Morgan Stanley’s Research Department and is not a research report but it may refer to a Morgan Stanley research report or the views of a Morgan Stanley research analyst. We are not commenting on the fundamentals of any companies mentioned. Unless indicated, all views expressed herein are the views of the author’s and may differ from or conflict with those of the Morgan Stanley’s Research Departments or others in the Firm. For additional information, research reports and important disclosures, see https://secure.ms.com.
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- This report does not provide individually tailored investment advice. It has been prepared without regard to the circumstances and objectives of those who receive it. Morgan Stanley recommends that investors independently evaluate particular investments and strategies, and encourages them to seek a financial adviser's advice. The appropriateness of an investment or strategy will depend on an investor's circumstances and objectives. Morgan Stanley Research is not an offer to buy or sell any security or to participate in any trading strategy. The value of and income from your investments may vary because of changes in interest rates or foreign exchange rates, securities prices or market indexes, operational or financial conditions of companies or other factors. Past performance is not necessarily a guide to future performance. Estimates of future performance are based on assumptions that may not be realized.
- Copyright © by Morgan Stanley 2009, all rights reserved.

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