In its investment analysis report issued recently, JP Morgan Chase expressed its opinion that China's economy has been into the fast track of soft landing and debates about the landing are fading away. In the mean time, the macro-policy adopted by the Chinese government is at a turning point. Although no further tightening measures is expected in the period to follow, policy alterations in the futre will make more differences to the economy.

On the way to a soft landing, consumption and export will play a buffer role. This is contrasted with the past practice that the economy was slowed downed by putting investment under the administrative restraint. Most of the important economic data made public recently props up soft landing expectation, including robust growth of consumption, robust growth of exports and mild inflationary pressure.

The best indicators of a soft landing are money supply expansion and credit increase. In this regard, Morgan Chase found that in June the increase of China's broad money M2 stood at 16.2 percent on a annual basis and it would level off at 15 percent for the long run, well below 17 percent targeted by the central bank.

The fixed assets investment for the second quarter rose 22.3 percent annually, a sharp decline from 43 percent for the first quarter but still much higher than 15 percent to 20 percent for the long term goal.

Morgan Chase sees little possibility of an interest rate soar as inflation, it believes, will not be deteriorated after consumers price index touched the warning line of the central government, an annual increase of 5 percent.

If there is a comfortable soft landing of China's economy, its GDP for the second half of the year , according to the estimation of Morgan Chase, will steam along at a speed of 7.5 percent due to the expectable stable situation in investment and continual rising of consumption and exports.

Morgan Chase thinks the GDP growth will reach 8.6 percent for the whole year of 2004 and 7.5 percent for 2005. And the climax of the inflation will be seen at the third quarter at 6 percent to 7 percent, then it will be followed by a downturn in the fourth quarter of this year and 2005.

However, Morgan Chase is also concerned about the central bank's mounting pressure on interest rate hike adding to risks of a hard landing if inflation speeds up.

By People's Daily Online