After Q2’s unexpectedly high GDP growth of 3.2 percent, China’s monetary support is tapering, purportedly in response to rising financial risks. China’s aggregate leverage level rose markedly in the 1H. The total Debt to GDP ratio increased from 245.4 percent at the end of 2019 to 266.4 percent in 1H 2020, according to National Institution for Finance & Development (NIFD). Nonperforming loan growth is also increasing. Data from the China Banking and Insurance Regulatory Committee shows that nonperforming loans in China’s commercial banks increased 322.9 billion or 13.4 percent from the end of 2019. The government’s adjustment in monetary stance indicates that Beijing is aware of the financial system risks and willing to tolerate slower growth to ensure financial market stability. As monetary support fades, so too does visibility into the sustainability of the Q2-to-date recovery. The next several months shall tell. Our short-term view remains unchanged: growth momentum is likely to tail off in the 2H.