China starts to unwind some of the stimulus

By Shane Oliver, Head of Investment Strategy and Chief Economist for AMP Capital Investors.

This note looks at the outlook for China in view of its recent move to start tightening monetary policy.

The key points are as follows:

China has embarked on monetary tightening and, with its economy growing strongly and worries that imbalances will build, further tightening is likely.
Although this will likely cause bouts of volatility in Chinese shares and global financial markets, China is a long way from undertaking a draconian tightening designed to crunch growth. We continue to expect Chinese GDP growth of around 10% this year.
As a result, Chinese tightening is unlikely to threaten the rising trend in shares this year, though it will, along with tightening elsewhere, result in a more volatile ride.