Economic activity data at the beginning of the year exceeded expectations as a whole. From January to February, industrial production was better than market expectations, benefiting from strong external demand and strong corporate capital expenditure. Despite the high base, infrastructure investment also rebounded strongly with the acceleration of monetary and financial support. Consumption reversed its weakness in December and recorded its strongest growth since August last year.
Higher than expected data may benefit from the accelerated pace of financial support. The improvement of infrastructure investment is faster than we expected, indicating that the investment efficiency of government bonds has improved this year. With the expansion of the effective fiscal deficit in 2022, we expect infrastructure activities to pick up from last year's low growth, and the growth rate of social finance is expected to further stabilize in the coming months.
Further monetary easing may be limited. Against the background that China's economic data was stronger than expected, the central bank maintained the medium-term lending facility (MLF) lending rate to financial institutions unchanged today. We expect that the monetary position will remain loose in the short term and help stabilize the growth trend. We do not rule out another RRR reduction in the second quarter. However, we also believe that the strong economic data from January to February and rising price pressure make it less likely for the central bank to further cut interest rates.
