China hard-landing risks on the rise: Daiwa (by Chris Oliver)

HONG KONG (MarketWatch) -- Risks of a serious economic slowdown in China are on the rise, according to Daiwa Capital Markets, which said on Tuesday it sees a 25% chance of a hard landing in the fourth quarter. Of 20 economic indicators that make up its China Momentum Gauge, 12 weakened in July while six were unchanged and two, including one that tracks property investment, showed gains. Daiwa analysts said they had doubts of the sustainability of fixed-asset investment spending growth amid funding constraints on public housing projects, as well as tighter credit conditions faced by local government financing vehicles and developers. Meanwhile, another indicator which has a pretty good track record in predicting industrial production activity, weakened in June for a fifth straight month. Slowing money supply growth also points to the coming weakness, Daiwa said, noting that M2 grew in July at its weakest pace in 31 months.