THE SECOND-QUARTER GDP growth figure came in at 6.7%, the same as for the first quarter. So growth for the first half was surprisingly steady and, surprise, surprise, bang in the middle of the government’s target range for the year of 6.5%-7.0%. Policy support through state-sector infrastructure spending has done the trick.
More of it will probably be needed in the second half. The economy expanded at 6.9% last year, so the slowdown is real if gradual.
However, it cannot slow below 6.5% if the 2021 centenary of the founding of the Communist Party is to be celebrated by hitting the goal of doubling GDP from its 2010 level and thus creating a ‘moderately prosperous society’.
That, in turn, will require more progress on ‘rebalancing’ the economy than has been made to date. At the same time, the infrastructure spending being used to juice growth risks a build-up of more debt with the accompanying concerns that more of it will go bad.
As IMF deputy managing director Mitsushiro Furusawa noted at a symposium on July 11:
A rising share of debt is held by Chinese companies that do not earn enough to cover their interest payments. The most recent IMF Global Financial Stability Report estimated that “debt-at-risk” had increased to 14 percent of listed Chinese companies’ debt, up from 4 percent in 2010.
Still within the bounds of manageability, but moving closer to them rather than away.