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• China’s economy has eased moderately in H1 2011, strongly affected by the monetary tightening, the slowdown in demand from its major export partners, and supply-side bottlenecks.
• A rebalancing of the economy towards consumption could be underway, since the contribution of consumption to real GDP growth has increased significantly from 2010.• Easing investment activity is expected to constitute the main drag on real GDP growth in 2011 and 2012.• Overall, real GDP growth is projected to moderate to 9.3% y-o-y in 2011 and 8.9% y-o-y in 2012. This moderation can be considered a soft landing, with the risk of a marked slowdown rather low.
• In our view, even if advanced economies deteriorate much more sharply than anticipated, the downside risks to China’s growth outlook are limited by its flexible policy regime.