China Meets GDP Target: Boosted by Stimulus and Credit Growth


I suppose it is no surprise really that the official release from China confirmed that GDP growth met market expectations, expanding at a slightly faster than expected rate of 7.5%. Market participants, and it would seem the Chinese hierarchy, are not willing to accept the lower economic growth rates that are a necessary sacrifice for a more sustainable rebalancing of the Chinese economy.

The latest GDP growth has been driven by the government’s stimulus measures and a further expansion of credit at a time when concern is mounting over China’s growth model and possible defaults in the Chinese financial system. Last week, Bloomberg reported that the Chinese building company Huatong Road & Bridge Group Co. said it “may miss a 400 million Yuan ($64.5 million) note payment due July 23”. Yet the market remains unperturbed by the risk of defaults in China with investors being driven by an unrelenting faith in central banks and governments.

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