No risk of overheating: Data from the first few months have shown China growing at over 30% in year-on-year terms. Does this mean the economy will overheat? We don’t think so. Stripping out the base effect, as COVID-19 was widespread this time last year, we estimate underlying GDP growth to be 5.4%, below pre-pandemic levels of 6%. Moreover, the recovery remains uneven, with private consumption lagging given rising unemployment. From a fundamental perspective, we expect GDP growth to remain below its potential growth rate in H2 2022 and beyond. In other words, there will still be a negative output gap (actual growth minus potential growth), which implies that the risk for broad-based inflation will remain remote.