There are two ways of looking at the raft of data released by the mainland yesterday.
The first, and the most popular, is to see what economists call the Goldilocks picture. According to this view of the numbers, the pace of activity is neither too hot nor too cold.
This is the ideal scenario. Growth is strong. Adjusted for inflation, output was up 11.9 per cent in the first quarter of the year - an acceleration from the 10.7 per cent rate recorded in the last quarter of last year, and the fastest growth since the second quarter of 2007 (see first chart below).
At the same time, however, inflation is modest and abating. Consumer prices were up by 2.4 per cent in March from a year before. That's down a touch from the 2.7 per cent inflation rate recorded in February (see second chart).
Many economists find this picture enormously encouraging. It means that Beijing's stimulus efforts have worked a treat. Last year's 9.7 trillion yuan expansion in bank loans successfully restored growth after the abrupt slowdown at the end of 2008. And now that things are back to normal, the authorities are winding back the rate of credit growth before high inflation can kick in. As a result, new bank lending in the first quarter was down more than 40 per cent year on year.
The good news doesn't end there. Slower bank lending means the pace of investment cooled in March. At the same time, government-mandated wage increases and subsidies for purchases of big- ticket items like cars and televisions have supported retail sales, which were up a handsome 17.9 per cent in the first quarter compared to a year before.
As a result Beijing is successfully engineering a rebalancing of the domestic economy away from investment and export-led growth - China actually recorded a trade deficit in March, its first in six years - and towards a more sustainable consumer-driven model. Top marks to Beijing for economic management.
