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In mid-January, China’s National Bureau of Statistics released their 2017 growth estimate for the country. In a surprise to no one, the official figure came in at 6.9 percent, exactly the number that Premier Li Keqiang revealed a week earlier during a China-sponsored Mekong River regional cooperation forum in Cambodia. Leaving aside the perennially suspicious speed with which China’s statisticians tabulate their annual figures after the New Year, the uptick to 6.9 percent was greeted with less incredulity from the international economic community than in some previous years.
The reason, as The Conference Board told the New York Times, is that China’s rebound last year was probably real—although the improevement came off a much lower 2016 figure than the government would admit. Whether China is growing in the mid- to high-6 percent range or hovering closer to 4 percent as The Conference Board asserts, most parties agree on the general trend, and that trend was positive last year. However, the aggregate rate isn’t the story so much as how China got there. As Yuan Gao, our senior economist in Beijing, told the Times, "We think the recovery is real. We’re just concerned that a lot of it is built on bad debt."
2017’s acceleration was driven by excessive lending and a real estate bubble; how will the leadership handle the inevitable downshift that must occur in 2018 in order for China to stay on a healthy path towards deleveraging and sustainable growth?