Is China’s 6.9% GDP growth genuine?

Growth last year beat official expansion targets but fears persist all is not what it seems

China has experienced an economic explosion over the past 25 years
(Image credit: STR/AFP/Getty Images)

China’s GDP grew by a massive 6.9% last year, beating Beijing’s official expansion target and delivering the first year-on-year growth increase in seven years.

Despite this, fears persist all is not what it seems in the world’s second largest economy.

China is a key driver of the global economy and so the better-than-expected data is likely to cheer investors around the world. But the BBC says “many China watchers believe the GDP numbers are much weaker than the official figures suggest” and cites recent admissions by the local governments of Inner Mongolia and the large industrial city of Tianjin that their economic numbers for 2016 were overstated.

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Questioning whether the latest GDP growth data can be trusted, the BBC’s China Correspondent, Robin Brant, said: “China's figures can be so stable, so in line with government targets, that it’s hard to really believe them.”

This is worrying for investors and global markets given China’s importance to the world economy.

“High growth has also come at a high price” domestically, says The New York Times, citinig “rising borrowing that has triggered downgrades of China’s sovereign debt rating by credit agencies; severe pollution of China’s air, water and soil; and persistent social problems associated with the movement of tens of millions of workers to cities”.

The ballooning debt, estimated by the IMF as equivalent to 234% of total output, has led to efforts to rein-in riskier forms of borrowing.

The Financial Times warns that “the trade-off between growth and de-leveraging will get tougher this year”.

A slowing property market and tighter controls on local-government infrastructure spending combined with harsh measures to tackle the country’s growing air quality problem could result in a drop in economic growth in 2018 as the authorities shift attention from GDP growth and move to improve banks’ finances.

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