Behind all the confusing news reports and questions about bank lending and a credit freeze, we think what markets are really worried about are the fundamentals of growth and inflation. Has inflation become a bigger concern and will the government be forced to lower its growth target to fight it? What really motivated the early credit control and will much tighter credit and lower growth lead to a quicker realization of non-performing loans? How to navigate through the policy uncertainty and market confusion in the months ahead?

Our answer is that despite the recent pick-up in the Consumer Price Index (CPI), we see inflation remaining moderate and within the government's target in 2010, at 3 to 4 percent.

Our 9 percent gross domestic product (GDP) forecast for the year may have to be adjusted upward even with the ongoing policy tightening, although growth in the second half is expected to decelerate to about 8.5 percent year-on-year.