The analysis team at Standard Chartered suggests that strong Q1 growth of China has provided the scope for authorities to continue the tightening process.
“China’s economy grew a faster-than-expected 6.9% in Q1, leaving authorities enough scope to tighten policy in the remaining quarters, given the 6.5% full-year growth target. While fixed asset investment and industrial production have stabilised amid a recovery in property sector investment, recent regulatory and monetary tightening suggests authorities are concerned about risks to financial stability.”
“Easy fiscal policy likely to balance monetary tightening: Apart from mitigating financial risks, we believe authorities are mindful of maintaining growth and job creation ahead of the crucial once-in-five-years Communist Party Congress in Q4. Thus, we believe fiscal policy is likely to remain loose, partly offsetting gradually tighter monetary policy.”