China Economic Comment:Robust Activity Ahead of the NPC –February Data Preview

January & February data likely show robust activity.

    February manufacturing PMIs showed improved momentum post the Chinese NewYear, with better new orders and new export orders, stronger production momentum,improved raw material inventory, and slightly weaker but still firm input pricemomentum. We expect China’s February economic data release to show a robust startto 2017, with higher industrial production growth, resilient property sales, strongeroverall average monthly FAI for January and February; seasonally lower new credit,better export growth, lower CPI but notably higher PPI, and a slight decline in headlineFX reserves for February.

    NPC meeting policy preview.

    The upcoming National People's Congress (NPC) will likely follow key policy stances aslaid out in earlier senior leadership meetings. We expect 2017's GDP growth target tobe set at ”around 6.5%” versus last year’s “6.5-7%”, fiscal policy to remain supportivewith a higher budget deficit alongside ongoing quasi-fiscal support, monetary policy tostay “prudent and neutral” with a tightening bias, financial regulations to be enhancedand better coordinated, property policy to stay differentiated with a focus on curtailingproperty bubble risks, and supply side structural reforms to gain more traction in excesscapacity reduction, rural & agricultural areas, mixed-ownership development, debtrestructuring and reduction of corporates' financial burden.