Oct 19, 2016
China's economy grows at 6.7% but experts warn of 'unsustainable' bubble
'Amazing what a housing bubble and crazy debt increases can achieve," says Michael Every, head of financial markets research at Rabobank in Hong Kong
China's economic growth remained stable in the third quarter, all but ensuring the government's full-year growth target is met and opening a window for policy makers to deliver on vows to rein in excessive credit and surging property prices.
"It's amazing what a housing bubble and crazy debt increases can achieve," said Michael Every, head of financial markets research at Rabobank in Hong Kong. "This is not sustainable – but then the alternative is nothing anyone wants to think about."
Gross domestic product rose 6.7 per cent in the third quarter from a year earlier, matching the median projection by economists surveyed by Bloomberg, and smack in the middle of the government's 2016 goal of 6.5 per cent to 7 per cent growth. Services industries paced the expansion in the first nine months of the year, expanding 7.6 per cent.
Stabilizing growth gives room for policies aimed at containing swelling leverage and curbing excessive financial risks, with IMF researchers among those calling for such efforts. The government released guidelines last week for reducing debt, yet past pledges have often been ignored as rampant credit growth fuels surging house prices in the nation's biggest cities.
Releases for September showed the continuing shift in China's economy toward consumer spending, with retail sales gains outpacing the rise in industrial production. Investment spending continues to be led by the public sector, the figures showed, with subdued private business spending highlighting the problem of high levels of debt.
by Marthe Fourcade