摩根士丹利-中国为何将深化其在全球供应链中的地位-Why China will deepen its presence in global supply chains-20261001

Morganstanley

October1,202606:41PMGMT

RESEARCHAsiAPAciFicINsiGHt

AsiaEconomics

WhyChinawilldeepenits

presenceinglobalsupplychains

Tradetensionsnotwithstanding,Chinahascontinuedtodeepenitspresenceinglobalsupplychainsbycapturingvalue-added

contentinglobalimportsandincreasingexportstoEMs.Weseethistrendcontinuing,allowingChina'sglobalexportsmarket

sharetoriseto16.5%by2030,upfrom15%now.

China’spresenceinglobalsupplychainshasbeendeepening:Despitetheriseofprotectionistmeasures,Chinahascontinuedtodeepenitspresenceinglobalsupplychains.Itsmarketshareinglobalexportshasrisenby2ppsince2017andwe

estimatethatitsshareofvalue-addedcontentinglobalexChinaimportshasalso

risenby2ppsince2017inabroad-basedmanneracrossmostmanufacturingsectors.

Leadingwithinnovationandindigenoustechnologies:Chinaisattheforefrontofemergingsectors,leadingwithinnovationandindigenoustechnologies.Itplaysa

criticalroleinsupplyinglow-costcomponentsandhigh-endcapitalgoods,

supportedablybyadomesticsupplychainthatisfullyintegrated.Aswehave

highlightedbefore,China’spolicymakershavealreadybeenplanningforthenexteraoftheindustrialcycle.AswemoveintotheembodiedAIphase,Chinahasalreadybuiltupadominantroleinroboticsandhumanoids,andisworkingonapplying

embodiedAIinanindustrialsetting(seeChina'sEmergingFrontiers:China'sNextIndustrialRevolution,Sep.9,2026).

TheUSisstillimportingjustasmuchvalue-addedcontentfromChina,justnotdirectly:TheUS’stariffandnon-tariff-relatedmeasureshavereducedChina’sshareinUSimportsby14ppsince2017,butweestimateChina’svalue-addedcontentinUSimportshasactuallyheldsteady.Inotherwords,theUSisineffectimporting

indirectlyfromChina.Havingsaidthat,theUShasatleaststabilizedtheshareofChinesecontentinitsimportsagainstabackdropwhereChina’svalue-added

contentintherestoftheworld’simportshasrisenby2ppinthesameperiod.

EMsareincreasingtheirrelianceonChina:Fortherestoftheworld,especiallyforEMs,theirtraderelationshipwithChinacontinuestodeepen.Theyareincreasing

theirrelianceonChinatofeedtheirdomesticdemandandarealsorelyingonChinatosupplythemwiththepartsandcomponentsneededtogrowtheirexportsbasket.Forinstance,whileIndiahasmadesignificantheadwayinelectronicsmanufacturing,itstillimportsalargepartofitsintermediateandcapitalgoodsfromChina.

WhyChinawillcontinuetowidenitsleadinglobalexportsshare:Webelievethecombinationoftargetinghighgrowthsectors,executingwithanintegratedsupplychain,havingafinancialsystemalignedwithstrategicgoals,focusingonR&Dandinnovation,andalargeskilledtalentpoolmeanthatChinaremainswell-positionedtodeepenitspresenceinglobalsupplychains.WecontinuetoexpectChinawill

raiseitsmarketshareinglobalexportsfrom15%currentlyto16.5%by2030.

MoRGANSTANLEyAsiALimiTED

JonathanCheung

Economist

Jonathan.Cheung@

+8522848-5652

ChetanAhya

ChiefAsiaEconomist

Chetan.Ahya@

+8522239-7812

MoRGANSTANLEyAsiA(SiNGApoRE)PTE.

DerrickYKam

AsiaEconomist

Derrick.Kam@

+656834-8272

MoRGANSTANLEyAsiALimiTED

RobinXing

ChiefChinaEconomist

Robin.Xing@

+8522848-6511

KellyWang

Economist

Kelly.Wang@

+8523963-0891

MoRGANSTANLEyINDiACompANyPRivATELimiTEDSudhanshuAgarwal

Economist

Sudhanshu.Agarwal@

+91226995-4568

Forimportantdisclosures,refertotheDisclosureSection,locatedattheendofthisreport.

2

Morganstanley

RESEARCH

AslAPAclFlclNslGHT

Chartscan

Exhibit1:DMeconomiesarenowde-industrializingasEMs–ledbyChina–arecontinuingonthenpath

RealIPexconstruction(SAIndex,2017-18=100,3mma)

ChinaIndiaMexicoVietnam

USJapanFranceGermany

180

160

140

120

100

80

183

157

141

107

101

98

91

84

Aug-16

Feb-17

Aug-17

Feb-18

Aug-18

Feb-19

Aug-19

Feb-20

Aug-20

Feb-21

Aug-21

Feb-22

Aug-22

Feb-23

Aug-23

Feb-24

Aug-24

Feb-25

Aug-25

Feb-26

Aug-26

Source:Haver,MorganStanleyResearch

Exhibit3:Mirroringtheriseinglobalexportshares,globalrelianceonChinesevalue-addedcontenthasbeenrising

2016

2017

2018

2019

2020

2021

2022

2023

2024

China’sshareofvalueaddedcontentinglobalex-Chinaimports

GlobalexChinaUSEU

JapanVietnamIndia

40%MexicoThailand

Theyearbeforetariffswere36.6%

imposed

25.1%TheUSsawaspikeinChinavalueadded

25%18.2%contentsharein2017duetopossible23.8%

20%19.9%

17.3%

14.3%15.4%

14.9%12.7%

6.9%8.3%

5%

10%10.7%14.3%

17.7%frontloadingfromUS-Chinatradetensions

15%12.6%

35%

Source:ADB,MorganStanleyResearch

Exhibit5:EvenasChina’sshareinUSimportsdeclined

significantlyinrecentyears,Chinesevalue-addedcontentshareinUSimportshasactuallyremainedrelativelystable

China’sshareoftotalvalueaddedembodiedinimportsChina'sshareinoverallimports(RS)

15.4%

US

20.0%

2017:17.7%18.0%

2016,21.1%

16.0%

2016,15.9%

14.0%

Spikein2017duetopossiblefrontloadingfromUS-Chinatradetensions

26.0%

24.0%

22.0%

20.0%

18.0%

16.0%

14.0%

12.0%

10.0%

8.0%

6.0%

13.5%

9.0%

7.9%

20162017201820192020202120222023202420252026

12.0%

10.0%

8.0%

6.0%

Source:ADB,Haver,MorganStanleyResearch;Note:2026dataasofJul-26on12Mtrailingsum

Exhibit2:Chinahasseenasustainedriseinglobalexportmarketshare

ChangeinglobalgoodsexportsharesinceDec-17(%,12M

2.5%

2.0%

1.5%

1.0%

0.5%

0.0%

-0.5%-1.0%-1.5%

-2.0%

trailingsum)

India

US

Germany

0.7%

0.4%

0.0%

-0.3%

-0.4%-1.2%

-1.5%

China

VietnamFrance

MexicoJapan

2.1%

Dec-17

Jun-18

Dec-18

Jun-19

Dec-19

Jun-20

Dec-20

Jun-21

Dec-21

Jun-22

Dec-22

Jun-23

Dec-23

Jun-24

Dec-24

Jun-25

Dec-25

Jun-26

Source:Haver,MorganStanleyResearch

Exhibit4:Vietnam,ThailandandMexicosawthelargestincreasesinChina’sshareofvalueaddedintheirimports

EU

Vietnam

Mexico

11.5%

9.5%

6.6%

2.2%1.7%

1.7%

1.4%

-2.3%

2017US

Japan16%India

TheyearbeforetariffsThailand

12%wereimposed

8%

4%

0%

-4%TheUSsawaspikeinChinavalueaddedcontentsharein2017duetopossible

-8%frontloadingfromUS-Chinatradetensions

ChangeinChina’sshareofvalueaddedcontentinglobalex-Chinaimportssince

GlobalexChina

2017

2018

2019

2020

2021

2022

2023

2024

Source:ADB,Haver,MorganStanleyResearch;Note:TheUSsawaspikeinChinavalueaddedcontentsharein2017duetopossiblefront-loadingfromUS-Chinatradetensions

Exhibit6:AgrowingshareofChinesevalueaddedcontentarrivingintotheUSisnowdoingsoindirectly,i.e.,viaothereconomies

2017,14.9%3.9%

3.5%

DirectChinavalueaddcontentshareinUSimports

IndirectChinavalueaddcontentshareinUSimports(RS)

16.0%

15.0%

14.0%

13.0%

12.0%

11.0%

10.0%

9.0%

8.0%

11.5%2017,2.7%

3.0%

2.5%

2.0%

1.5%

4.0%

US

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

Source:ADB,Haver,MorganStanleyResearch

Morganstanley

RESEARCH

AslAPAclFlclNslGHT

Exhibit7:Closeto50%ofChina’sindirectvalueaddintotheUSisarrivingviaMexico,VietnamandTaiwan

Top15

Thirdeconomies

ShareofallChinesevalue-addedcontentgoingtotheUSviathirdeconomies

Chinesevalue-addedcontentshareintheeconomyexportstotheUS

1

Mexico

23.4%

7.8%

2

Vietnam

15.4%

21.0%

3

Taiwan

7.9%

9.7%

4

Canada

6.0%

2.0%

5

RestoftheWorld

5.7%

2.9%

6

Korea

5.6%

6.4%

7

Japan

3.9%

3.5%

8

Singapore

3.5%

6.9%

9

Germany

3.4%

2.5%

10

India

2.7%

2.6%

11

Thailand

2.4%

7.9%

12

Switzerland

1.7%

2.3%

13

Malaysia

1.6%

8.4%

14

Ireland

1.5%

1.7%

15

France

1.5%

2.0%

Source:ADB,MorganStanleyResearch

Exhibit9:IntheUS,only3sectorsinelectricalandopticalequipment,chemicalproducts,andleatherproductsand

footwearhavemateriallyreducedChinesecontentintheirimportsevenwhenrestoftheworldhasobservedariseinChinavalue-addedcontentoverthesameperiod

Chinavalueaddedcontentshareinmanufacturingsectorimports

(ppdelta,2024vs.2016)

shareinUSimportsshareinglobalexUSimports

-9.4%-7.2-.2%

-4.5%-3.3%

-0.7%-0.7%-0.5%

-2.1%

Woodandproductsofwoodandcork-11.4%

20.4%

1.7%

1.5%9.4%

6.3%14.4%

19.4%27.1%

3.2%

7.6%i1.1%

0.2%01.58%%

Electricalandopticalequipment

Rubberandplastics ChemicalsandchemicalproductsLeather,leatherproducts,andfootwearBasicmetalsandfabricatedmetal

MachineryandequipmentCoke,refinedpetroleum,andnuclearfuelPaperproducts

Transportequipment

OthernonmetallicmineralsTextilesandtextileproducts

Miscellaneousmanufacturing

-2.3%3.8%

-20.0%0.0%20.0%40.0%

Source:ADB,MorganStanleyResearch;Note:Wetake2016asabaseyearduetoaspikeinChinesevalue-addedcontentintheUSin2017amidpossiblefront-loadingaheadoftariffs.Miscellaneous

manufacturingincludestoys.

Exhibit8:China’svalue-addedsharegainshavebeenfeltacrossmostmanufacturingsectors

ChinabymanufacturingsectorvalueaddedshareinWorldex

Chinaimports(ppdelta,2024vs.2017)

25.4%

11.0%

10.1%

8.9%

6.7%

3.5%

2.5%

1.4%

1.2%

0.9%

0.9%

0%10%20%30%

Miscellaneousmanufacturing

Leather,leatherproducts,andfootwearTextilesandtextileproducts

OthernonmetallicmineralsMachineryandequipment

Basicmetalsandfabricatedmetal

ElectricalandopticalequipmentTransportequipment

Coke,refinedpetroleum,andnuclearfuelChemicalsandchemicalproducts Food,beverages,andtobaccoRubberandplastics

WoodandproductsofwoodandcorkPaperproducts

-2.6%-3.4%

-3.4%

-10%

Source:ADB,MorganStanleyResearch;Note:Miscellaneousmanufacturingincludestoys.

Exhibit10:ChinavalueaddedinimportssharehasincreasedacrosstheboardinAsiaexChina

11.9%11.5%

10.0%

9.9%9.5%

7.3%

6.1%

4.9%

3.6%

2.6%

2.2%

1.9%

1.7%

Philippines

Vietnam

Taiwan

Indonesia

Thailand

HongKong

Australia

AsiaexChina

Singapore

Malaysia

India

Korea

Japan

Chinashareoftotalvalueaddedinimports(2024,vs.2017,

pp)

0.0%2.0%4.0%6.0%8.0%10.0%12.0%14.0%

Source:ADB,MorganStanleyResearch

MoRGANSTANLEyREsEARcH3

4

RESEARCH

Morganstanley

Executivesummary

AsiAPAciFicINsiGHt

EffortstoreducedependenceonChinahaveincreasedinrecentyears:Thetransitiontowardsamultipolarworldhasintensifiedthefocusoneconomic,nationalandtech

security.Aspolicymakersincreasinglytakeupeffortstodiversifysupplychainsandde-riskinstrategicsectors,thereisincreasingfocusonthebilateraltradebalances(seequotes

below).FacedwithrisingtradedeficitswithChina,globaltradepartners–ledbytheUS–haveincreasinglypursuedwaystoaddressthisviatariffsandnon-tariffbarriers.But

despitethesemeasures,China’stradesurpluswiththerestoftheworldhascontinuedtoriseoverthepastsixyears,underpinnedbyrisingcompetitivenessinkeyemergingnewsectorsaswellasrelativelysubdueddomesticdemand.

“TheworldcannothaveaChinawithaUS$1.2trilliontradesurplus…TherestoftheworldisgoingtohavetoexaminetheirtermsoftradewithChina”–US

TreasuryBessent,Aug-26

“OurtradedeficitwithChinaisnow€1billioneuro—aday.Ithasreachedatippingpoint…Itleadstode-nintheindustrialheartlandsofEurope.Thisis

unsustainable.”-EuropeanCommissionPresidentvonderLeyen,Sep-26

Goingbeyondbilateraltradebalances-AholisticapproachtoassessdependenceonChina:Bilateraltradeflowsprovideausefulstartingpoint,buttheydonotcapturethefullextentofhowtherestoftheworldisdependentonChina.Inanincreasingly

multipolarworld,tariffsandothertradebarrierscanredirecttradethroughthird

economies,whetherthroughshippingorconductingfinalassemblyinthirdeconomies.

Thiscanobscureaneconomy’simportanceinanothereconomy’sproductionand

consumption.Toprovideaholisticview,wemakeuseoftheworldinput–outputtables,tracingtheoriginsofthevalueaddedcontentineacheconomy’simportsandexports,

includingChinesecontentthatreachesitsdestinationindirectlythroughothereconomies.ThisapproachprovidesamorecomprehensiveassessmentofChina’spresenceinglobalsupplychains,helpingtodistinguishshiftsintraderoutesfromunderlyingchangesin

dependenceonChina.

OuranalysiscomplementstheoverarchingconclusionfromourglobalandChina

economicsteam’swork–thatis,modernsupplychainsaregeographicallyconcentratedandtechnologicallycomplex,requiringsignificantup-frontinvestmenttoshift,with

geopoliticaldistancesbetweentradepartnersfurthercomplicatingtheseshifts.Intheiranalysis,ourglobaleconomicsteamfoundthatmostlow-hangingfruitfromsupplychainrealignmentopportunitieshasalreadybeenharvested.Instead,furtherrewiringofsupplychainswilltaketimetodevelop,introducehighercosts,andincreaserisk(seeGlobal

EconomicThematic:MultipolarWorld:SupplyChainStrain,Feb17,2025).ForChina,ourfindingsalsoalignwithourChinaeconomicsteam’sviewthatChina’sroleinglobaltradeisonlychangingformandnotdiminishing,froma“madeinChina”modeltowardsa

broader“madebyChina”modelwhereproductscanbemadeelsewherewithincreasingChinavalue-addedcontent(seeBluepaper:China'sNextIndustrialRevolution,Sep9,

2026).

MoRGANSTANLEyREsEARcH5

Morganstanley

RESEARCH

AsiAPAciFicINsiGHt

Wehighlight7keyconclusions:

#1:GlobalrelianceonChinesevalue-addedcontentcontinuestorise:China’svalue

addedcontentshareinglobalimports(excludingitsownimports)hasrisenfrom12.6%in2017(beforetheonsetofthefirstroundofUS-Chinatradetensions)to14.3%in2024.Asimportingdestinations,theEUandtheUShavetogetheraccountedfor~80%ofthis

increase,reflectingboththeirweightinglobalimportdemandandstabletorisingChinesecontentwithintheirownimports.ThisisfollowedbyVietnam,India,MexicoandThailand,reflectinggreateruseofChineseinputsintheseemergingmanufacturinghubs.

Exhibit11:ThedirectionoftravelisstilltowardsgreaterglobaldependenceonChina

China’sshareofvalueaddedinglobalex-Chinaimports

15.0%China'smarketshareinglobalexports

14.3%

2017,12.9%

2017,12.6%

China

16.0%

15.0%

14.0%

13.0%

12.0%

11.0%

10.0%

9.0%

8.0%

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

Source:ADB,MorganStanleyResearch

Exhibit12:TheUSandEUexplainabigpartoftheincreaseddependence

2016

2017

2018

2019

2020

2021

2022

2023

2024

China’sshareofvalueaddedcontentinglobalex-Chinaimports

GlobalexChinaUSEU

JapanVietnamIndia

40%MexicoThailand

Theyearbeforetariffswere36.6%

imposed

25.1%TheUSsawaspikeinChinavalueadded

25%18.2%contentsharein2017duetopossible23.8%

20%19.9%

17.3%

14.3%15.4%

14.9%12.7%

6.9%8.3%

5%

10%10.7%14.3%

17.7%frontloadingfromUS-Chinatradetensions

15%12.6%

35%

Source:ADB,Haver,MorganStanleyResearch;Note:TheUSsawaspikeinChinavalueaddedcontentsharein2017duetopossiblefront-loadingfromUS-Chinatradetensions

#2China’svalue-addedsharegainshavebeenfeltacrossmostmanufacturing

segments:Chinesevalue-addedcontentsharegainsinglobalimportsoverthepast

decadehavebeenbroad-based,withgainsin10outofthe13broadmanufacturing

segments.Someofthelargestgainshavecomeintraditionallylowervalue-added

segmentsintextiles,leatherproducts,footwearandmiscellaneousmanufacturing,whileChinahasalsomadefurtherinroadsintohighervalue-addedsegments.Chinanow

accountsfor33%value-addedcontentshareinelectricalandopticalequipment,24%inmachineryandequipment,and10%intransportequipment.ThesepatternsareconsistentwithChinaretaininghigher-valueproductionprocessesevenasfinalassemblymoves

elsewhere,whileChinacontinuestosupplytheequipmentandinputsneededbynewmanufacturinghubs.

Morganstanley

RESEARCH

AsiAPAciFicINsiGHt

6

Exhibit13:Chinanowholdssubstantialglobalvalue-addedcontentsharesacrossmultiplemanufacturingsectors

ChinavalueaddedinWorldexChinaimportsbysector

(%shareineachsector,2024)

48%

48%

47%

Leather,leatherproducts,andfootwearTextilesandtextileproductsMisc.Manufacturing

33%

32%

mm24%

ElectricalandopticalequipmentOthernonmetallicmineralsMachinery,nec

Retailtrade,exceptofmotorvehiclesandmotorcycles;…mm21%Basicmetalsandfabricatedmetalmm17%

All35sectorsmm14%

Rubberandplasticsmm13%

Woodandproductsofwoodandcorkmm12%

Airtransportmm11%

Transportequipmentmm10%

Chemicalsandchemicalproductsmm10%Constructionmm10%

0%10%20%30%40%50%60%

Source:ADB,MorganStanleyResearch

Exhibit14:China’svalue-addedsharegainshasbeenbroad-basedacrossbothlowervalue-addedsectorsandhighervalue-addedsectors

ChinabymanufacturingsectorvalueaddedshareinWorldex

Chinaimports(ppdelta,2024vs.2017)

Miscellaneousmanufacturing

Leather,leatherproducts,andfootwearTextilesandtextileproductsOthernonmetallicminerals

MachineryandequipmentBasicmetalsandfabricatedmetal

ElectricalandopticalequipmentTransportequipment

Coke,refinedpetroleum,andnuclearfuelChemicalsandchemicalproducts Food,beverages,andtobaccoRubberandplastics

WoodandproductsofwoodandcorkPaperproducts

-2.6%

-3.4%

-3.4%

mm11.0%

mm10.1%

8.9%

6.7%

mm3.5%

2.5%

1.4%

1.2%

0.9%

0.9%

25.4%

-10%0%10%20%30%

Source:ADB,MorganStanleyResearch

#3:TheUSisstillimportingfromChina,justnotdirectly:TheUShasactivelydiversifiedawayfromChinaasanimportsource,asevidencedbythedeclineinChina'sshareinUS

importsfrom22%in2017to8%currently.However,theapproachhasbeenlesseffectivewhenconsideringChinesevalue-addedcontentinUSimportsgenerally.WhileChinese

value-addedcontentinUSimportshasnotrisenlikeithasinrestoftheworld'simports,ithasalsonotdeclinedovertime.Instead,China’sshareofvalue-addedcontentinUS

importshasbeenbroadlystableoverthepastfewyears,at15.4%in2024.

Thishasalsomeantthat25%ofChinesecontentinUSimportsnowfirstgothroughthirdeconomies(versusarrivingbilaterally),up10percentagepointssince2017.Thisincreaseduseofindirectchannels,particularlysince2022,isuniquetoUS-Chinatradeandis

consistentwithrelocationofproductionservingtheUSmarket,whileremainingreliantonChineseinputs.WedonotobserveasimilarshifttowardsindirectchannelsinimportsoftherestoftheworldoutsidetheUS,norforEUimports.

Exhibit15:Inrecentyears,Chinesevalue-addedcontentshareinUSimportshasactuallyremainedrelativelystable,evenasChina’sshareinUSimportsdeclinedsignificantly

China’sshareoftotalvalueaddedembodiedinimportsChina'sshareinoverallimports(RS)

15.4%

US

20.0%

2017:17.7%18.0%

2016,21.1%

16.0%

2016,15.9%

14.0%

Spikein2017duetopossiblefrontloadingfromUS-Chinatradetensions

26.0%

24.0%

22.0%

20.0%

18.0%

16.0%

14.0%

12.0%

10.0%

8.0%

6.0%

13.5%

9.0%

7.9%

20162017201820192020202120222023202420252026

12.0%

10.0%

8.0%

6.0%

Exhibit16:AquarterofChinesevalue-addedcontentarrivingintotheUSisnowdoingsoindirectlyviaothereconomies

2017,14.9%3.9%

3.5%

DirectChinavalueaddembodiedinimports

IndirectChinavalueaddembodiedinimports(RS)

16.0%

15.0%

14.0%

13.0%

12.0%

11.0%

10.0%

9.0%

8.0%

11.5%2017,2.7%

3.0%

2.5%

2.0%

1.5%

4.0%

US

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

Source:ADB,MorganStanleyResearch

Source:ADB,Haver,MorganStanleyResearch

MoRGANSTANLEyREsEARcH7

#4:~50%ofChina’sindirectvalueaddintotheUSisarrivingviaMexico,VietnamandTaiwan:In2024,closetohalfoftheindirectChinesevalueaddedreachingtheUSfirst

wentthroughMexico,VietnamorTaiwan.Withintheseeconomies,VietnamstandsoutashavingamuchhigherChinese-contentintensityinitsexportstotheUS.Chinesevalue-

addedcontentaccountedfor21%ofVietnam’sexportstotheUS,vs.8%ofMexico’sexportstotheUSand10%forTaiwan.

Exhibit17:Closeto50%ofChina’sindirectvalueaddintotheUSisarrivingviaMexico,VietnamandTaiwan

Top15

Thirdeconomies

ShareofallChinesevalue-addedcontentgoingtotheUSviathirdeconomies

Chinesevalue-addedcontentshareintheeconomyexportstotheUS

1

Mexico

23.4%

7.8%

2

Vietnam

15.4%

21.0%

3

Taiwan

7.9%

9.7%

4

Canada

6.0%

2.0%

5

RestoftheWorld

5.7%

2.9%

6

Korea

5.6%

6.4%

7

Japan

3.9%

3.5%

8

Singapore

3.5%

6.9%

9

Germany

3.4%

2.5%

10

India

2.7%

2.6%

11

Thailand

2.4%

7.9%

12

Switzerland

1.7%

2.3%

13

Malaysia

1.6%

8.4%

14

Ireland

1.5%

1.7%

15

France

1.5%

2.0%

Source:ADB,MorganStanleyResearch

#5:MoresectorsintheUShaveincreasedratherthanreducedtheirdependenceonChina:Since2016,onlyfiveofthe13manufacturingsectorsintheUShaverecordeda

materialreductioninChinesevalue-addedcontentintheirimports.Twoofthese,woodproductsandrubber&plastics,alsosawdeclinesinChinesecontentoutsidetheUS,

suggestingthisisabroaderglobaltrendratherthanaresultofUSpolicyactions.

Electricalandopticalequipment,chemicals,andleatherproductsandfootwearthereforestandoutasthethreesectorswhereUSimportsharesfellwhileChinesecontent

increasedelsewhere.Incontrast,textiles,miscellaneousmanufacturing,nonmetallicminerals,paperproductsandmetalssawrisingChinesecontentinUSimports,

underscoringtheunevennatureoftheadjustment.

8

Exhibit18:IntheUS,only3sectorsinelectricalandopticalequipment,chemical

products,andleatherproductsandfootwearhavemateriallyreducedChinesecontentintheirimportsevenwhenrestoftheworldhasobservedariseinChinavalue-addedcontentoverthesameperiod

Chinavalueaddedcontentshareinmanufacturingsectorimports

(ppdelta,2024vs.2016)

shareinUSimportsshareinglobalexUSimports

-2.3%3.8%

Woodandproductsofwoodandcork-11.4%

Electricalandopticalequipment

Rubberandplastics ChemicalsandchemicalproductsLeather,leatherproducts,andfootwearBasicmetalsandfabricatedmetal

MachineryandequipmentCoke,refinedpetroleum,andnuclearfuelPaperproducts

-9.4%-7.2-.2%

1.7%

20.4%

-4.5%-3.3%

3.2%

7.6%'1.1%

0.2%01.58%%

-0.7%-0.7%-0.5%

-2.1%

Transportequipment

1.5%9.4%

6.3%14.4%

19.4%27.1%

OthernonmetallicmineralsTextilesandtextileproducts

Miscellaneousmanufacturing

-20.0%0.0%20.0%40.0%

Source:ADB,MorganStanleyResearch;Note:Wetake2016asabaseyearduetoaspikeinChinesevalue-addedcontentintheUSin2017amidpossiblefront-loadingaheadoftariffs.Miscellaneousmanufacturingincludestoys.

#6:FortherestofAsia,shiftingawayfromChinaischallenging:China’svalue-addedcontentshareinAsiaexChina’simportshasrisenby5ppsince2017-to21.5%in2024.

Thisriseinvalue-addcontentfromChinahasbeenbroad-basedacrosstheregion,and

particula