China's National People's Congress underscored a continued adherence to GDP growth targets, in line with building a "moderately prosperous society" by the 100-year anniversary of the Communist Party in 2021. Efforts to contain financial risks will also remain a focus, bolstered by the authorities' confidence in the strong growth momentum sustained over the past year.
Nevertheless, a slowdown could test the improved policy balance between growth and financial stability, and might trigger a reversion to a more expansionary policy stance.
The 2018 macroeconomic targets announced at the NPC indicate broad stability in policy settings, with the GDP growth target effectively unchanged from 2017 at about 6.5%. This implies a slowdown from 2017, when the economy outperformed the target, expanding by 6.9%. The 2018 target is consistent with our own forecast, which reflects tighter credit conditions and a cooling property sector.
Growth should remain strong enough to provide the authorities scope to continue addressing macro-financial risks through most of this year. They made use of improved global activity and strong domestic momentum to advance reform and tighten financial regulation in 2017.