Growth despite tightening

In the coming months, Chinese growth prospects will be fueled by strengthening fundamentals domestically and internationally. Yet, the People’s Bank of China (PBOC) must remain vigilant, due to the risk of inflation. As leading indicators, particularly the producer price index (PPI), are expected to rise, and as inflation tends to emulate the PPI over time, the PBOC’s tighter stance is warranted, even if food prices have remained under control for now.

Internationally, Chinese economy must cope with likely adverse implications from the US Federal Reserve’s expected two more rate hikes, which will contribute to new growth challenges around the world, particularly in the emerging and developing economies.

Furthermore, while the first Trump-Xi meetup managed to contain many potentially adverse prospects, uncertainty is still the potential risk for the bilateral ties. -

In 2016, China’s actual growth was 6.7 percent. The current target for 2017 is “around 6.5 percent.” What the strong first quarter performance does make possible is a more decisive shift to fiscal and monetary tightening in the second half of the year, while keeping the current growth target intact.

That’s the real achievement of the Chinese economy in the first quarter.

The author is the founder of Difference Group and has served as research director at the India, China and America Institute (USA) and visiting fellow at the Shanghai Institutes for International Studies (China) and the EU Center (Singapore).