China's GDP grows at 6.8% in Q4 buoyed by govt spending, bank credit

Beijing, ChinaUpdated: Jan 20, 2017, 04:13 AM IST
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Chinese authorities have imposed tough COVID curbs which has led to a slump in factory activity Photograph:(Reuters)

China's economy sprang a surprise in its last quarter as the economy grew at more-than-expected 6.8 per cent on year driven by government spending and record bank lending, Reuters reported.

The economy expanded at 6.7 per cent in 2016, according to the National Bureau of Statistics, roughly in the middle of the government's 6.5-7 per cent growth target but still the slowest pace in 26 years.

But Beijing's decision to double down on spending to meet its official growth target may have come at a high price, as policymakers will have their hands full this year trying to defuse financial risks created by an explosive growth in debt.

The world's second-largest economy also faces increased uncertainties from a cooling housing market and the government's bid to push through painful structural reforms, which could help deal with the root-cause of rising debt and housing problems but weigh on near-term growth.

Economists polled by Reuters had expected China would report 6.7 per cent growth for both the fourth quarter and the full year. 

The economy grew 6.7 per cent in the third quarter.

While China is on more solid economic footing than this time last year, it faces increasing uncertainties in 2017, with a housing frenzy showing signs of cooling and the impact of previous stimulus measures expected to fade.

China's sluggish exports also could come under fresh pressure if US President-elect Donald Trump follows through on pledges to impose tough protectionist measures.

"While Chinese growth looks stable into early 2017, a more marked slowdown by the second quarter appears inevitable," Gene Frieda, global emerging markets strategist at asset management giant PIMCO, said in a note this week.

The head of economic planning said last week that conditions have been generally stable at the start of 2017, continuing the "steadying and good" momentum from the second half of 2016. 

Amid those reassuring signs of stabilisation, policy sources told Reuters that China's leaders will lower their economic growth target to around 6.5 percent this year, giving them more room to push reforms to contain debt risks.