China’s official PMI rose above 50 in March. This is good news, but China’s economy is set for a tepid recovery at best.

A surge in lending might increase the chances that Chinese interest rates remain on hold this year, but if the economy remains weak, as we expect, the People’s Bank will still be forced to cut again.

The renewed optimism about China’s prospects that had supported global equities earlier in the week could start to unravel on the back of today’s disappointing budget.

China’s annual National People’s Congress (NPC) opens tomorrow with an address from Premier Wen Jiabao and the presentation of the government budget. Here are seven key issues to watch.