China: Two sessions - TDS

Monday has marked the beginning of China's annual "Two Sessions", which will (among other things) present the government's annual work report, and set 2018 economic targets, points out Sacha Tihanyi, Deputy Head of Emerging Markets Strategy at TDS.

Key Quotes

“As inflation remains generally contained and stable, we expect the 3% inflation goal to be renewed for a 4th consecutive year. Growth will likely again be the key target which all other policy variables pivot on, but a more restrictive regulatory regime and the repeatedly stated goal of prioritizing quality of growth over quantity, implies on the margin a softening of the target.”

“It has been reported by "sources" (not officially confirmed) that the Central Economic Work Conference in December brought an agreement for a growth target of "around" 6.5%.”

“Our measure of China's underlying growth trend suggests that Q4, while still improving, saw the first momentum deceleration since the reflation began in Q3'16. This is to be expected, given the blistering pace of the recovery was not sustainable, and regulatory/housing market restraints are now biting.”

“This suggests that the official language announcing the growth target may reflect the increased flexibility to accept growth on the lower side of the "around" part of 6.5%.”