First quarter data an encouraging sign

Chinanews.com:

Although the 6.7 percent growth is slightly lower than that in previous quarter, China's macroeconomic performance is better than market expectations in terms of composite prices, fixed-asset investment, and total currency and credit volumes. Despite the slight decline, the 6.7 percent growth in the face of complicated economic circumstances at home and abroad testifies to the government's admirable macro-regulation capability.

Aside from improving macroeconomic indexes, people have confidence in China's economy also because of the smooth progression of the ongoing economic restructuring, which includes intensive fiscal policies comprising increased infrastructure investment, the recovery of the real estate sector and a loose monetary policy that has reduced enterprises' financing costs.

But there is no reason to be over-optimistic about the dynamics of the "economic recovery". The encouraging first-quarter data, to a large extent, should be attributed to the increase in real estate and infrastructure investments, which are closely related to the loose monetary policy.

Whether or not China works out follow-up financial and tax policies will decide whether its economic recovery will continue. But in the context of the ongoing economic restructuring, the evidently improved economic situation will give China a bigger space to implement the needed reforms.