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One in three probability of a hard landing starting between now and the end of 2014 (where a hard landing is defined as four consecutive quarters of growth of five percent pa or below);
Risk of such skewed to the latter part of that period. Between now and mid-2013 Chinas leaders will be firmly focused on ensuring a smooth economic trajectory around the political inflexion point of the handover of power to the fifth generation leadership; They have plenty of fire power to ensure that that is so, even taking into account the possibility of a fairly sharp exogenous shock although, clearly, a major exogenous shock (eg break-up of the eurozone, a military strike on Iran and consequent sustained oil price spike) could make keeping the economy on an even keel very difficult to impossible; Beyond mid-2013 Chinas leaders will need to address significant structural and systemic challenges which will not be straightforward. However, since 1992 (ie Deng Xiaopings nanxun) they have shown an impressive ability to steer the economy through very choppy waters.
Fitch RatingsAndrew Colquhoun, Head of Asia-Pacific Sovereigns, Fitch Ratings China has the policy flexibility to engineer a soft landing Fitch expects China's economy to grow 8.2 percent in 2012, with downside risk from the eurozone and from the unwinding of China's own property boom. China has policy flexibility to respond to shocks. But the real question is whether China's economy can manage the transition to a more sustainable consumption-led growth model in the longer term. Moody's AnalyticsAlaistair Chan, Economist, Moody's Analytics A soft landing, but a hard landing is an ever-present risk A hard landing remains an ever-present risk for Chinas economy but our base case remains an orderly deceleration in growth. The main near term risk for China is the property market. Anecdotes abound of falling prices in the primary market and falling transactions in the secondary one. In our view, this is wholly expected: the government is still clearly willing to bear the consequences of tight restrictions and a slowdown in the market to deflate the housing bubble. Beijing has plenty of options if it decided to offset a housing bust. Its fiscal position is strong. Along with reversing the property market restrictions, it has the capacity to offset any fiscal problems arising from local governments. Banks would almost certainly need to be bailed out, but the government has had prior experience. Chinese wages are lower than Japan's in the early 1990s, and there is a structural trend of higher inflation, which gives monetary policy greater room to move and reduces the risk of a liquidity trap. HSBCQu Hongbin, Economist, HSBC Beijing has the fiscal flexibility to engineer a soft landing With inflation quickly shifting to disinflation, growth stability tops the policy agenda with calls for more aggressive easing measures. Inflation, as measured by CPI and PPI, has fallen rapidly in recent months. But growth is also decelerating and the latest leading indicators point to a further slowdown in 2012. The European debt crisis and falling property prices will only add to downside pressure on growth. This means Beijing has to respond decisively to stabilize growth and the job market. We expect the central bank will pursue across-the- board easing. As with the policy tightening cycle, we expect quantitative tools to be used Second, we expect fiscal policy to be as, if not more, important than monetary policy. Total fiscal revenue surged nearly 27 % y-o-y in the first 11 months of 2011 and the central governments net cash position has topped around RMB4trn (nearly 9% of GDP). This puts Beijing in a strong fiscal position to cushion a slowdown in growth. Watch for tax cuts for small and medium-sized enterprises (equivalent of around 1% of GDP), additional spending on public housing and ongoing infrastructure projects, and more subsidies for poor rural households.