China never ceases to amaze the world. This Friday, the Chinese economy grew against expectations and reached another top level thanks to an increase of 6.8%. This good news for the fourth quarter of the country is the result of the decision of the government to boost spending. The banks have also participated in this process by increasing their lending rates. However, the year of 2017 might see some side-effects of such actions that can take the form of debt risks.
Beijing decided that without speed, the economy will remain low. This is why things evolved at a much faster pace. While the official growth target was undoubtedly achieved, nobody knows how much time the government will be able to control the situation. The debt sector has grown to record levels, and this can result in high prices. Policymakers are now confronting with the possibility of financial risks.
The good news about this is that it is the first time in two years when the Chinese economy has shown signs of expansion, no matter how weak it might be. However, the year of 2017 might not witness any further progress in this field. This is because unless the government manages to balance the situation, the housing market might explode. Furthermore, the second largest economy in the world has to deal with a new U.S. administration. Only a good relationship can ensure the prosperity of the nation.
Tom Rafferty, the regional manager for the Economist Intelligence Unit in China, stated that experts could not see how the financial booming can extend to 2017 as well. First things first, there are several issues that need to be solved before plunging into a better economy. The demand has to be restored to better terms by normalizing the housing market and improving the commodity sector.
The strong points of the Chinese economy in the fourth quarter were the property investment and the consumer spending. The housing market raised investments by 11.1% in December even though property prices started to decrease in certain areas. Moreover, December saw a rising interest in car and cosmetics purchases. Nonetheless, before reaching for higher grounds, China has to prioritize financial stability. The government will lower the official growth target for 2017 at 6.5% in an effort to address the debt risks and keep them under control.
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