Why Beijing's rosy economic numbers hide a much bigger problem...
On Friday China announced its economy had expanded at a 6.7 percent rate in the first quarter of 2016. While this is the slowest growth since the depths of the great recession, it conveniently remains within the government’s official target of 6.5-7.0 percent. Unlike all developed countries, there will be no revisions to this figure in the coming months or quarters.
There were two factors that kept Beijing’s growth within its target range: Easy money and the property market. The level of “total social financing,” or borrowing, rose 16 percent in March from a year ago.
This was fueled by the bond issuance by local governments as part of its bailout program and investment in ‘fixed asset investment’ which is largely composed of infrastructure and factories.