It's make your mind up time for the Chinese government. The world's second biggest economy slowed in the first three months of 2014 and will slow further in the second quarter. The moderation in the pace of expansion was anticipated and engineered by Beijing as part of a liberalisation programme but the question now is whether policymakers will hold their nerve.
On the face of it, there is little to worry about. The economy grew at an annualised rate of 7.4% in the first quarter, which as usual was almost smack in line with official forecasts. Most analysts think the real growth is lower and use proxies such as electricity use or imports of industrial metals from Australia to judge what is really happening. But even the official numbers point to a marked slowdown.
Growth in the first quarter was 1.4% (5.7% annualised), down from 1.7% (7% annualised) in the final three months of 2013. Industrial production was soft, investment was weak, money and credit growth is slowing, and the housing market appears to have gone from boom to bust.
The issue for Beijing is whether consumption will continue to hold up in the face of a troubled property market and interest rates that are uncomfortably high for a country where personal debt is 200% of GDP.
It is helpful for China that the US seems to be recovering quickly from its weather-induced winter slowdown and that the eurozone is gradually pulling out of recession. But it doesn't entirely dispel concerns about a hard landing.
Policymakers in China have made it clear they intend to stick to the reform plan. They believe there were nasty side effects from the colossal stimulus package during the winter of 2008-09, including inflation, a property bubble and much wasted investment.
But expect a few tweaks or a bit of fine tuning to help the economy along. China's economic policy is governed by the old maxim: make haste slowly. A mini-package of measures involving targeted public investment and tax breaks for small and medium-sized companies is already in the pipeline. Expect that to be supplemented by action by the People's Bank of China to cut the cost of borrowing.
