Upbeat data confirm that China’s economic recovery is holding, and that the current strong momentum should continue over the coming several months. This means that China’s Q4 GDP growth is likely to be higher than we previously anticipated. We maintain, however, that several key factors driving the current momentum are not sustainable, specifically: double-digit export growth, booming property investment, and abundant liquidity and investment funding flows. Growth will inevitably slow as these factors diminish. The recent wave of corporate bond defaults is evidence of the mounting downward pressures on growth. It is worrisome that these defaults are happening as Beijing shifts monetary policy, ever so gradually, from loose to normal (Bloomberg News). As the steep phase of recovery flattens, and credit conditions continue to tighten, expect volatility to increase.