Despite perceived clouds on the horizon, economists are confident that the economies of China and the US, as the world's key growth drivers, are most likely to stabilize and recover later this year.

"Although we see the Q3 data decelerating from Q2 on the mainland, we do see some stabilizing signals from leading indicators," said Aidan Yao, senior emerging Asia economist with AXA Investment Managers, an asset management unit under insurance group AXA.

"For September, industrial production on the mainland rebounded quite vigorously, while the HSBC Purchasing Managers Indexes are picking up. Most importantly, regarding the rebalancing of the overall economy, we are seeing real retail sales being lifted. All these indicate that the economic momentum is stabilizing as we go into the fourth quarter," Yao said.

AXA believes that another "targeted stimulus" seems likely to keep the mainland's GDP growth at seven percent this year, and expects 6.9 percent in GDP growth for 2015.

Mainland exports have accelerated in the third quarter, driven by demand from the US and the European Union. But, with foreign demand unlikely to pick up further, the mainland may have to boost further domestic demand to achieve its growth targets, and easing refinancing conditions by the People's Bank of China could be a first step.

Industry insiders expect the mainland authorities to announce a 100-billion yuan cash injection by a Mid-term Lending Facility on Thursday, that could lead to a targeted rate cut.

"I tend to feel the slowing down of China's economy to be a good thing," reckoned Eric Chaney, chief economist with AXA Group.

"If the mainland economy is still growing at eight to nine percent, it probably will lead to an enormous build-up of debts, which will be followed by huge corrections or a large income fall in future, based on our experience. So, I think that through a progressive slowdown, China is on a sustainable path," Chaney said.

Meanwhile, the mainland is shifting to a more balanced economic structure with the services sector taking an increasing share, but exports manufacturing is shrinking.

As for the US, Chaney said the fundamentals are improving and unemployment is on the decline, while consumers are prepared to spend more with the return of wealth. But, it's still hard to sense what the Fed is going to do. "US growth is robust enough to end the quantitative easing, and not raising rates," he said.

"It's also likely that the next US interest-rate hike won't come before the end of 2015, or early 2016," Chaney added.

xieyu@chinadaily.com.cn

(HK Edition 10/30/2014 page8)