Despite the PBOC’s delivery of higher interest rates on short-term liquidity immediately after the Fed’s 25 bps hike, China’s economic trajectory is more likely to diverge from the US-led global recovery over the next two quarters. At the same time, China’s monetary tightening push is not a reactive response to an improvement in cyclical indicators or inflationary pressure, but is a longer duration proactive attempt to manage systemic financial risks.
