China's leading indicators, reported last week, look reassuring after the disappointing turn they took in February (see chart below). While these latest readings cannot alone project the future path of the Chinese economy, they remove some of the pressure that had been weighing on the authorities in recent months. On the face of it the economic stimulus applied by the government is starting to pay off.
Two subcomponents of the indicators need to be watched closely: employment and construction. A significant deterioration in the labour market would make it hard for China to create enough jobs to prevent social imbalances. Meanwhile buoyancy in building would indicate that the state is spending too much on infrastructure, at the expense of private consumption. The country is not at that point now.