Glimmers of hope in March

It was not hard to find evidence of economic weakness in China in Q1. Imports, retail spending, property sales and, of course, GDP growth all slowed. But there were glimmers of a turnaround towards the end of the quarter. Electricity output growth stabilised in March, industrial production growth picked up and, most significantly, bank lending far exceeded expectations. But a sustained economic rebound is far from assured. Risks still hang over the export and property sectors. Interbank interest rates are already rising again, signalling that March’s lending burst depleted banks’ cushion of excess reserves. Further required reserve ratio cuts are likely soon to ensure credit growth remains strong.