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China growth beats forecasts, but debt risks loom

Friday, January 20, 2017 - 01:47

China's economy grew a faster-than-expected 6.8 percent in the fourth quarter, boosted by higher government spending and record bank lending, giving it a tailwind heading into what is expected to be a turbulent year. Graham Mackay reports.

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An unexpected uptick in China's economy. Fourth-quarter GDP coming in at 6.8% on Friday, the first time in two years that growth has edged up. Propery was one of the hot spots, as was consumer spending on things like cars and cosmetics. But as Reuters Elias Glen reports, it's not all smooth sailing going into 2017. (SOUNDBITE) (English) REUTERS CHINA ECONOMICS CORRESPONDENT, ELIAS GLEN, SAYING: "There'a also a risk about the growing about of debt in the Chinese economy Investment bank UBS said today that the ratio of debt to the size of the economy rose again to 277% last year, which is a very high level and continues to rise. This is a problem because as the debt levels rise, the ammount of money needed to pay off that debt also rises, meaning there's less money for spending on other parts of the economy." For the full year, growth came in pretty much slap bang in the middle of Beijing's target range, though inside sources tell Reuters the government is going to be forced to lower its expectations in 2017. That said, there's a major event coming up that means China can ill afford to let things slip too far. "China's expected to hold its 19th party congress this autumn, where president Xi Jinping will look to expand his grip on power, and new leadership will be named. The theme leading up to these sensitive meetings is typically stability, so economists do not expect any major changes this year, as the government looks to keep growth stable." Despite the fourth quarter uptick, Chinese growth is still at a 26-year low, and one major uncertaintly still looms large: What lies ahead in the era of Donald Trump, the incoming U.S. leader who's promised to make buying anything with a made in China label a whole lot more expensive.

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China growth beats forecasts, but debt risks loom

Friday, January 20, 2017 - 01:47