Chinese government slashes GDP target to seven percent

China's policy makers are holding their annual conference in China on various issues including economy and Geo- political that is expected to continue further over the week.

Updates so far -

• Seems like consensus have emerged and China's premiere downgraded the growth target to 7 percent for the year compared to previous 7.5 percent. This is the lowest level since 1990. This was somewhat expected.
• The officials have shrugged of the fear of decline growth and tried to praise the height of it and felt this to be achievable over relatively long time.
• Downgrade also came in inflation target. That is reduced to 3 percent compared to previous 3.5 percent.

Reality -

• China's growth slowed to 7.4 percent last year and below the target.
• Slashing the target by 0.50 points mean that the slowdown is quite fast.
• Average 7 percent would also mean growth can fall below 7 in some quarters.
• Current CPI in China is well below target and recent time slowed from 1.5 percent to 0.8 percent.
• The inflation target will be difficult to achieve without bounce back in energy price.

Impact -

• PBOC to continue the easing cycle.
• Pressure on the commodities to persist from the demand side.
• Market would be vulnerable to future data spook in China's growth.
• Chinese stock index, CSI 300 is down nearly 1 percent for the day further down days could be ahead especially if the debt burden gets out of hand and prompts corporate defaults.
• Yuan could suffer more against dollar.