China: Policy at a Crossroads?

Posted July 13, 2011 by Editor

[private]- GDP figures are scheduled for release tonight. Meanwhile, other data being published before the GDP announcement suggest that policy is at or near a crossroads in China.

– Figures on GDP that exceed expectations of growth around 9.3% or thereabout would definitely create room, even put pressure on the PBOC to engage in at least one more interest rate hike. On trend or weaker growth could mean that last week’s hike was the last of the cycle.

– In either case, however, it should be emphasized that the situation is in flux and the question of whether China has “soft-landed” will probably remain key for at least several months, particularly given the potential influence of external unresolved processes, such as the European debt crisis and uncertainty as to whether the US is going through a soft-patch or descending permanently into a lower pace of expansion in an already below-par recovery.

7-12-11–EMG INDICATORS AND INSIGHTS _China’s Inflation and Monetary Policy_[/private]