China Economic Outlook Third Quarter 2014

Growth in China stabilized in Q2, due to the improving external demand and the authorities' stimulus policies. In particular, the authorities have implemented a set of unconventional monetary policies to spur bank lending and boost growth momentum. We maintain the growth projections of 7.2% in 2014 and 7.0% for 2015. Headline inflation is expected to rise moderately while the RMB will resume its gradual appreciation going forward. Moreover, fiscal policy will remain “pro-growth” in H2 whereas the currently loose monetary policy is likely to turn neutral. Risks concentrate on uncertainties surrounding the US monetary policy normalization, the sluggish real estate market as well as several financial fragilities.

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