Real growth momentum remains weak for China

Market concerns of a possible growth hard landing are on the rise. The latest real economic data points suggest that foundation for a growth recovery is not solid, and economic growth faces more downward pressure as financial sector activity has slowed after the recent stock market slump. Though the recent CNY devaluation in theory should not be viewed as growth negative, the volatilities in the FX market and higher capital outflow pressures may weigh on investment sentiment in the near term. 

The government stepped up fiscal spending and tax cuts amid rising growth concerns, and introduced a series of measures to improve funding for infrastructure spending since mid-May, the positive economic effects of which could be more visible in 4Q. On the fiscal front, the government will likely step up fiscal spending especially to accelerate infrastructure investment and take multiple measures to expand funding sources, such as to increase spending by policy banks, utilize idled fiscal funds and ease local government funding. It could roll out further cuts of tax and administrative fees.