China Economic Outlook Quarterly
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Growth of the Chinese economy remained solid at 6.7% in 2Q18, marginally lower than 1Q18 but the risk of a significant growth rate downshift in the second half has increased. Despite fairly resilient domestic foundamentals, weakening external demand amid escalating trade tension with the US is threatening the growth outlook. Our baseline scenario of a managed slowdown in 2H18 rests on the assumption that fiscal spending will increase and monetary policy will turn more growth-supportive in the coming months. We have revised the probability of a China hard-landing to 15% from 10%, with a stable outlook, mainly on account of increasing uncertainty arising from intensifying Sino-US trade tension.