China's post-covid rebound still intact
|Summary
Following strong February PMI data, we are adjusting our 2023 China GDP forecast higher. We now believe China's economy can grow 5.5% this year, and given the country's size and influence in a global context, we are now more convinced the global economy can avoid recession this year. Strong momentum behind the rebound also lead us to believe the incentive for easier PBoC monetary policy in the near-term has diminished, and only until the post Zero-COVID surge in activity fades by early 2024, do we expect China's central bank will look to trim Reserve Requirement Ratios again. With the Fed likely to ease monetary policy at a quicker pace than the PBoC over the medium to longer term, the outlook for renminbi strength over time remains intact, although risks to China's economy and financial markets are abundant as geopolitical tensions with the United States have been renewed.
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