China Game ON – What Did You Expect?
Last night China began the National Peoples Congress meetings (NPC) China makes it clear that they are targeting both growth and inflation and will tinker where they need to but the operative word is tinker.[caption id="attachment_59727" align="alignright" width="300" caption="Shanghai skyline at night"] [/caption]
On the back of the CBS 60Minutes piece ( see clip of Stephen Roach, former Head of Morgan Stanley in China, strongly challenging the accuracy of that view last night on Fast Money ), and the overall destruction in the commodities space, people were letting part of the tail wag the dog.
China is the dog.
They are not the Great Dane of 2005-2010, but they are no lap Poodle either.
While we are cautious on the direction of the USD going higher and pressuring commodities and emerging markets with it, we are not questioning whether China can grow.
The anxiety over near term tightening is off the mark. They are looking to keep growth in line with 2012, not to slow it.
Formally here is what they have announced as targets: GDP +7.5%, CPI target 3.5%, M2 growth 13%. The growth numbers are inline, the inflation numbers are lower and the deficit is raised. Premier Wen made it clear that "Nothing is achieved without growth".
What to do now?
If you were selling commodities only on China fears you should be rethinking this strategy. If you were waiting on China to announce major overhauls in policy, you are still waiting on the sidelines.