China ended 2016 with 6.8% annualized GDP growth for Q4 that let it log 6.7% growth for the year. Among other things, Beijing’s data divas were eager to report that fixed-asset investment (FAI) had jumped 8.1% last year.
But a quick dissection of that number reveals that a surge in FAI by state-owned enterprises (SOE) saved the year.
Fiscal stimulus was laundered through state firms to moderate fears that the economy lacked self-sustaining vigor.
This credit-fueled fixation on hitting short-term growth targets in lieu of long-term structural reforms is not sustainable.
Fitch estimates China’s credit growth climbed 16.1% in 2016, and forecasts that GDP growth will fall to 6.4% this year and 5.7% in 2018.
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