As economic growth slowed, the worries about overheating and asset bubbles have declined, but fresh concerns about a hard landing increased. While some believe more tightening measures are necessary to bring down housing prices, others call for a new stimulus or a relaxation in macro policy to avoid a "double dip" in China's economy. The latter group of people may consider 8% GDP growth as too low and sub-8 percent growth as a recession.

We see the ongoing deceleration of economic activity as still consistent with a soft-landing scenario, and expect the government to maintain the current macro policy stance for at least the next few months. For policy makers, GDP growth of 11% (H1 2010) and export growth of 40%+ hardly warrants a relaxation of policy or fresh stimulus.

On the property sector, policy makers are likely to wait to see the full impact of the ongoing measures before implementing new policies or changing course. We do not expect property tax to be unveiled any time soon.

On monetary policy, we expect (i) no change in this year's credit target (RMB7.5 trillion new loans, 18% growth); (ii) no rate hike in 2010; possible rate hike starting in Q2 2011; and (iii) no RRR hike in the short term, an increased use of central bank bills to sterilize inflows of foreign exchange, which is expected to increase again in the coming year.

On fiscal policy: The ongoing clean up of local government investment vehicles is critical to contain fiscal and banking sectors risks over the medium term. However, this does not mean that government stimulus-projects launched in the past 18 months will not be supported. Moreover, the "exit" from the RMB 4 trillion-stimulus will only be gradual - which means budget deficit will likely be kept above 2% of GDP in 2011. In the Chinese context, this is considered a "proactive" fiscal stance, even though the fiscal impulse could be negative. We also expect new investment programs in the context of balancing regional growth and/or developing new strategic industries to be announced for implementation in 2011 and beyond, which could be seen as a continuation of the stimulus.

Eoin Treacy's view The Chinese stock market has been under a cloud for the last year as new supply overcame bullish sentiment and the removal of stimulus began to take a toll on bank earnings. The Shanghai Composite has been one of the world's laggards this year. It was one of the first to hit a medium-term peak and has so far failed to break the medium-term progression of lower rally highs. However, the renewed appreciation of the Yuan may offer a catalyst for increased investor interest over the medium term.

The last couple of weeks have seen some distinct signs of support building. The last two days has seen the Index form the first higher reaction low since March. The Index is now beginning to push back upwards into the last range in what could yet be a failed downside break and it remains comparatively overextended relative to the declining 200-day moving average which raises potential for a reversionary rally.

The Financial, Industrial and Materials sectors continue to dominate the CSI 300 Index with a combined weighting of 67%. However, these sectors are primarily representative of China's manufacturing/export sector and do not offer a great deal of leverage to the swiftly developing domestic consumer culture.

I have long argued that making healthcare available to many more of China's population was essential if the country's vast savings were to be freed up, allowing the nascent consumer economy to flourish. The CSI 300 Healthcare Index has been an outperformer since late 2008; benefitting from schemes to improve healthcare provision in rural areas. It has had a somewhat larger pullback than seen during the course of the medium-term uptrend but has found at least short-term support. It is now testing the 200-day MA and a sustained rally back above it would indicate a return to demand dominance, while a move to new high ground would to reassert the overall uptrend.

The Consumer Staples, Consumer Discretionary and IT sectors are also leveraged to the growth of the consumer economy and have been among the better performers during the recent malaise. They remain candidates to lead in any recovery that takes place.