“The apparent deterioration in productivity and diminishing returns to leverage are not as severe as the consensus thinks when one takes into account true activity," writes the team, arguing China's consumption and services are larger than officially reported. If true, it gives the economy more room to cope with slowing productivity growth. Plus, there's Beijing's "formidable" financial resources.
Higher overnight, the MSCI China Index is off 7.6% on the year - heading for its worst quarter since 2008. The index trades at 9x reported earnings, a 23% discount to the MSCI Emerging Markets Index.