Downside risk to the 7% growth target of Chinese government

Chinese data for January and February released this morning was markedly weaker than the expected across the board.
 
Data for industrial production, fixed asset investment and retail sales for January and February are released together to allow for possible distortions from the Chinese New Year public holiday. 

Nonetheless, it cannot be completely ruled out there still being some distortions as the holiday was relatively late in February this year. 

Danske Bank notes in a report on Wednesday:

• Today's data suggest that there could already be downside risk to the 7% growth target for 2015 the Chinese government announced last week. 
  
  
• We will probably have to cut our 7.2% GDP growth forecast for 2015. That said, we would be more confident in a downward revision if the weakness evident in the hard industrial production data is also confirmed in the manufacturing PMIs in the coming months.
  
  
• With downside risk to the government's growth target, it also appears that there will be more monetary and fiscal easing in China than we have assumed so far. 
  
  
• The reserve requirement could be cut by more than 100bp and another interest rate cut looks increasingly likely. 
  
  
• The weak data could also increase speculation that China will allow its currency to depreciate, although we still expect the People's Bank of China (PBoC) to keep the current daily trading band broadly unchanged.