SINGAPORE (Dec 10): As we start thinking about economic prospects for the coming year, it is useful to identify the principal forces that will shape the outlook. It is clear to us that the Chinese economy will be one of the most important of such forces. Certainly, there have been growing concerns about China and these have weighed heavily on financial markets. Our view is that the downside risks have clearly grown:

• First, economic activity has slowed, possibly even more than official data has recorded. The main reason for deceleration seems to be related to domestic factors such as internal imbalances and the loss in confidence among private firms.

• Second, we expect aggressive policy measures to be stepped up, which should support economic growth at around 6% in 2019. However, the effectiveness of policy tools has weakened, while policy interventions could also cause some collateral damage.

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