Headwinds from pollution crackdown set to ease

One recent headwind to economic growth has been the government’s winter pollution crackdown in northern China, which has triggered numerous factory closures. This has had the desired impact of improving air quality but at the cost of limiting industrial activity in areas that generate a quarter of China’s GDP. Economic growth may rebound as anti-pollution measures are withdrawn over the next month or two. But we expect the economy to slow again later this year as weaker credit growth weighs further on activity.