The Chinese government released its 2017 economic and reform targets at the annual National People’s Congress (NPC) session. The government work report indicated that the overall policy focus this year will be on maintaining macro stability while continuing to promote structural reforms. From a commodity perspective, a slightly lower growth target supports our view that metals consumption will likely retreat this year but remains robust. To offset this decline in demand, deepening supply-side reform should continue to provide a structural support, especially for bulk commodities.
2017 GDP growth target is set at “around 6.5%, or higher if possible”. Recall that 6.5% is the floor rate that China needs over the next few years to double its 2010 GDP level by 2020. This year’s objective is lower than 2016 target of 6.5% – 7% and the actual growth rate of 6.7%. In our view, Beijing is focusing on maintaining stability and carrying out reform this year, in exchange for slower economic growth.