ING Mark Chinese GDP Growth Expectations Lower

Monday saw ING note that “we will soon see a set of economic targets from the government work report in the "Two Sessions" meetings, which will offer guidance for local government officials. Those responsive actions usually take around three months to become economic reality. Consequently, we are now revising our GDP forecast for China in 2022 to 4.8% from 5.4%. This revision is based on the assumption that infrastructure investment could drive economic growth in Q2 to Q2, with jobs, wages and consumption all benefiting from economic growth by the fourth quarter. Inflation is not a concern for China as CPI was only 0.9% Y/Y in January. The PBoC can therefore keep cutting the 7-day reverse repo and 1-Year MLF rates for a total of about 60bp during 2022, and we expect these cuts to be front-loaded in Q1 to Q2. We also expect some targeted RRR cuts to support SMEs. In this calculation, we have not included any significant escalation of trade tensions between China and the U.S., which means that even these revised figures could prove too optimistic.”