China: Monetary tightening likely to continue – Standard Chartered

The analysis team at Standard Chartered suggests that strong Q1 growth of China has provided the scope for authorities to continue the tightening process.

Key Quotes

“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.”