In govt's policy plans, stability is the key

The government's economic plans for 2017, presented at the recently concluded National People's Congress, China's top legislature, indicate that, despite more emphasis on containing financial risks, solid economic growth remains central to the economic and financial "stability", which the government considers essential in the run-up to the 19th National Congress of the Communist Party of China, scheduled for the fall of this year.

The GDP growth target of "around 6.5 percent, slightly higher if possible in practice" will require continued accommodative macroeconomic policy and increases in the credit to GDP ratio. On the fiscal side, the issuance of special local government bonds and use of "special funds" are likely to raise the cash fiscal deficit to 4.3 percent of GDP this year. In addition, quasi-fiscal activity continues apace in order to finance infrastructure spending.

The monetary targets and plans imply a slightly less accommodative stance than last year, with overall credit growth, excluding equity and adjusted for local government bond issuance, targeted at 14.8 percent, only slightly less than in 2016.