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China: Hard Landing or Gentle Descent?

Investors have expressed concerns about an imminent hard landing in China and potential long-term effects on both global growth and global equity returns. The MSCI Macroeconomic Model forecasts indicate that an imminent hard landing is unlikely: GDP growth in China could meet the official target of 7.5% by the end of the year. Moreover, the MSCI Asset Pricing Model indicates that Chinese real growth risk is a small contributor to long-term global equity risk. In addition, our models indicate that Chinese equities carry a long-term premium to compensate investors for bearing the risk of disruptions in Chinese economic growth.