China’s economic growth is set to accelerate for the first time in seven years after hardly skipping a beat in the third quarter, Reuters reported on Thursday.
With year-on-year growth of 6.9% through the first three quarters of 2017, the country is all but certain to exceed its full-year target of “around 6.5 per cent” growth, the Financial Times reported. As a result, the Chinese economy, which grew 6.7% last year, is poised for its first year-on-year acceleration in growth since 2010.
Beijing’s push to consolidate and restructure its industrial sector have paid dividends, Reuters reported, while strong fiscal spending and sustained public investment have also helped boost domestic demand. But, central bank governor Zhou Xiaochuan (pictured above) on Thursday warned about household and corporate leverage, raising concerns about how much of the growth is is debt-driven.
Economists also warned that the Chinese economy this year benefited from the lagging impact of significant monetary and fiscal stimulus in 2016, the Financial Times report said. The stimulus boosted short-term growth, but added to long-term risks from reliance on debt-fuelled investment.
“The latest growth data paint a reassuring picture...Beneath the surface, potential financial market stresses continue to build up but remain at bay for now,” Eswar Prasad, the former China head for the International Monetary Fund, was quoted as saying by the Financial Times.
On the sidelines of the Chinese Communist Party’s 19th congress, which occurs twice-a-decade, central bank governor Zhou said excessive optimism could lead to a “Minsky Moment”. The banker was referring to to a theory named after economist Hyman Minsky, which posits that debt or currency pressures trigger a collapse in asset prices after long periods of growth.
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