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Data Flash is a brief interpretive summary of China’s official monthly economic data release.
Selective tightening by the PBOC that intentionally pushed up money market borrowing costs in Q4 to squeeze leverage out of the China bond market, plus cautious wording in the monetary policy plan for 2017 as laid out in the Communist Party’s December Economic Work Conference report, suggests that monetary policy in 2017 will be less supportive than in 2016. In addition to debt-risk containment imperatives, two other factors limit growth-supporting monetary policy in 2017: rising inflationary pressures and rising RMB depreciation pressures. Neither is poised to abate in the near term. Reduced monetary support plus a cooling housing market should see Chinese growth resume its structural slowdown by mid-2017.