China.

The annual session of China's National People's Congress, the closest it has to a legislature, opened this week. The announcement that the GDP growth target for 2014 will be "about 7.5%" was keenly awaited, and comes in at the top end of what we think is sustainable. The government is rightly keen to rein in credit growth, amid worries about bad loans, local government debt and a possible housing bubble, but doing that will put the brakes on growth. This target sets up a tough choice for 2014: miss the target or stop cleaning up the financial system. Given the importance of the latter, we expect the government to have to accept a lower growth rate. We are currently forecasting 7.2% growth, but we will nudge this up to 7.3%, because the Chinese Communist Party has a good track record of not being too far off target, at least as far as the official statistics go. While growth in China is slowing, even if the target is met, it is worth remembering that it still has one of the fastest growth rates in the world: quite an achievement for an economy of its size.

How does the changing nature of Chinese growth impact on you? Please let me know at simonjbaptist@eiu.com or via Twitter at @Baptist_Simon.

Best regards,

Simon Baptist
Chief Economist and Asia Regional Director