VIEW: Good Growth Makes PBoC Pause

ING note that looking at the latest batch of economic activity activity data together, “China's Jan-Feb GDP should be better than previously expected. This also makes it likely that the PBoC will hold the 1-Year Medium Lending Facility rate steady at 2.85%. But risks are piling up. Covid in Shenzhen has led to a lockdown of the city. This could affect port operations if Covid cases are found there. There is also some suspension of factory operations. But manufacturing output in Shenzhen is not the main activity of the city, which focuses more on technology services. Working from home should not affect productivity substantially. The spread of Covid in the north of China could be more damaging, as this part of the country is more focused on heavy manufacturing. We believe the PBoC will also monitor these risks to see if they need to provide extra help to SMEs, for example, through targeted RRR cuts.”