China reported 7.4% GDP growth in 2014, roughly in line with the government’s target of 7.5%. As the market expected, the government has set the 2015 GDP target at “around 7%”, a further moderation in growth given the structural adjustment China is undergoing. This is not a surprise to us since we have been flagging decelerating growth in China in the coming years as a result of structural reform; 7% GDP growth in 2015 is what we have long talked about and also widely expected by the market.
Growth may be slowing as the government focuses more on quality over quantity, but it is definitely not collapsing. The government has ample liquidity to further stimulate the economy if needed. Since November, Beijing has cut interest rates twice and lowered the reserve requirements of major banks in a bid to spur growth. There will be additional interest rate and RRR cuts if macro data trend deteriorates further.
Read Lilian’s full monthly commentary here.
Commentary provided by LBN Advisers Limited in their capacity as Investment Adviser to the Fund as of 06 March 2015.