From: US GIO <us.gio®jpmorgan.com> To: Undisclosed recipients:; Subject: J.P. Morgan Macro Skinny: China: this is not what a hard landing looks like Date: Thu, 13 Sep 2012 11:07:24 +0000 Attachments: 2012-09-12_China-pdf.zip Inline-Images: image003.png; image004.png; image005.png; image006.png; image007.png; image008.png; image002.jpg September 12, 2012 China: this is not what a hard landing looks like I/ Chinese activity seems to be stabilizing at weak levels, but not free-falling. Yet most of the street is still assigning a relatively high probability of a hard landing scenario, predicated on a severe real estate bubble collapse. The housing market has admittedly lost steam since late last year, but more recently, momentum has turned positive again. Indeed residential prices and home sales are pointing up (left chart), while cement and steel production are far from suggesting a free-fall scenario (right chart). Importantly, housing momentum is turning without any direct fiscal or monetary help. When true bubbles (like the US, Spanish and Irish ones) were 'ready to explode', nothing could stop them from doing so. The stabilization in Chinese housing markets rejects the bubble hypothesis and the hard landing case along with it. EFTA01146583