China’s 6.7% Growth Fueled by Soaring Real Estate and Consumer Spending

By KEITH BRADSHERJAN. 19, 2017

The New York Times

BEIJING — China’s economy grew 6.7 percent last year and even accelerated slightly to 6.8 percent in the fourth quarter, the government announced on Friday morning, while dismissing concerns about the enormous lending that was needed to achieve that growth.

The strong results came after a weak start last year, when China’s currency and stock market were tumbling and many foreign investors fretted that the country’s three decades of robust economic expansion might be ending.



The Chinese government appears to have delayed an economic reckoning, but at a high cost. The central bank and state-owned banks shoveled trillions of renminbi into a surge of credit, putting aside longstanding worries about a deeply indebted corporate sector and signs of a real estate bubble. The government borrowed and spent heavily, continuing oversize projects like the construction of world-class highways and high-speed rail lines to cities that are increasingly remote from the main hubs of economic activity near the coast.

But Ning Jizhe, the commissioner of the National Bureau of Statistics, dismissed concerns about rising debt.

“I don’t think this worry is necessary,” he said at a news conference.

Consumers Keep Spending

Chinese and foreign economists generally agree that the best hope for the country’s long-term economic health is for the current emphasis on debt and investment to give way to greater consumer spending. Adjusted for inflation, consumer spending climbed 9.6 percent last year, led by blistering growth in online retail sales of 26.2 percent. But as in other countries, including the United States, much of that growth has come at the expense of brick-and-mortar stores and malls.

Real Estate Prices Surge

When Zhou Xiaochuan, the governor of China’s central bank, said at a news conference in Shanghai last February that the answer to China’s immediate economic troubles lay in more mortgages, few paid close attention. Chinese officials previously expressed concern that real estate prices were already too high, hurting affordability and exposing the economy to significant risks if prices tumbled.

But after Mr. Zhou’s remarks, state-owned banks were instructed to step up mortgage lending, and the results were spectacular. Sales of commercial buildings rose 34.8 percent, and residential sales climbed 36 percent as prices leapt higher and higher. Municipal governments in Shanghai and elsewhere began imposing administrative controls this winter to limit further price increases.

What’s in a Number?

Many concerns have been raised about the quality of Chinese economic data. Western economists have suggested that Chinese government statisticians underestimate growth in boom years and overestimate growth during busts to present a smoother overall picture of the Chinese economy. Worries about data quality increased after the state-run People’s Daily quoted Chen Qiufa, the governor of the northeastern province of Liaoning, as saying on Tuesday that local governments had inflated growth data from 2011 to 2014.

But many economists say last year’s growth appears to have been real — although bringing additional debt that could burden the economy for years to come. Mr. Ning insisted on Friday morning that national economic data was reliable, and he added that if local officials were caught fabricating data, “we will show no leniency.”

Follow Keith Bradsher on Twitter at @KeithBradsher