Will China see a hard landing?

The Fed clearly put China in the centre, indicating that a hard landing in China could delay lift-off further. While economists see risk to the downside for Q3 growth, and do not expect a hard landing.

Chinese Premier Li Keqiang was very firm at the 'summer Davos' in Dalian on 10 September when he stated that 'I'm not making an empty promise when I say that the Chinese economy will not head for a hard landing'.

China has already undertaken a lot of stimulus measures but apart from rate cuts and cuts to the reserve requirement ratio the measures tend to fly under the radar. Other stimulus measures have been the injection of money into policy banks for investments and setting up a fund of CNY60 bn that, with participation of private money, aims to support small and micro-business.

 It has lowered the initial capital requirement for fixed-asset investment projects and finally, the Finance Ministry recently announced some sort of fiscal stimulus on its webpage. No details were disclosed, however.

"In combination with a housing recovery that is clearly under way we believe these stimuli will lead to a moderate recovery of growth in Q4 and we should see a bottom in Chinese manufacturing PMI during the next two to three months. This is expected to ease the fear of a hard landing in China", says Danske Bank.