Hebei Province Slows to 3.5% GDP Growth

Hebei is warning for whole Chinese economy

Significantly, the fall in industrial output is policy-led, not market-led. While first quarter steel production in Hebei province fell 4.6 per cent year on year, output in the rest of the country rose 4.9%. Steel production in Jiangsu province rose 11 per cent, partly to compensate for production cuts in Hebei.

These developments serve to illustrate how far Beijing is prepared to go to ensure that its policy objectives – in this case a reduction in pollution levels in the north of the country – are met.

A similar determination can be seen in the financial system, where Beijing has launched a campaign to rein in shadow bank lending. M2 growth slowed to its lowest on record in March. This drove first quarter fixed-asset investment– the engine of growth in China’s economy -to its lowest rate of expansion for more than ten years.

Beijing’s resolve to push through reforms should not be underestimated.
The slowdown in the economy is a feature, not a bug. The risk is that the economy slows down too much, not that they abandon policy.

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