China shows signs of debt-fueled recovery
China posted its slowest economic growth since 2009 but a surge of new debt appears to be fueling a recovery in factory activity, investment and household spending in the world's second largest economy.
That's good news in the near-term, economists say, but many worry it marks a return to the old playbook used during the financial crisis, when Beijing hand-cranked its economy out of a slowdown through massive stimulus, rather than structural reform.
Official data on Friday showed China's gross domestic product grew at an annual rate of 6.7% in the first quarter of the year, easing slightly from 6.8% in the fourth quarter as expected. However, other indicators released showed new loans, retail sales, industrial output and fixed asset investment were all better than forecast.
While analysts say the data is evidence of a bottoming out in the economy's slowdown, some warn that the first quarter of 2015 got off to a similarly glowing start before a stock market crash later that year.
"What this shows is a stabilization of the old economy," said Raymond Yeung of ANZ, pointing to recovery in industrial production and fixed asset investment.
"I would still be a bit cautious about headline growth... last year's 6.9% figure was underpinned by a massive contribution from financial services, and the strong loan and credit growth recently and the recent resumption of IPO activity suggests this could still be a big contribution."
The National Bureau of Statistics said in a press conference in Beijing on Friday that while main economic indicators showed positive changes, "downward pressure cannot be underestimated."
It did not distribute quarterly GDP figures as it has in the past, saying it needed more time to calculate the figure.
Global financial markets took the data in stride, but domestic stocks fell slightly, as analysts said the strong data implied the likelihood of a slower pace of monetary easing.
The CSI300 Index of the largest listed firms in Shanghai and Shenzhen closed 0.1% lower.
Forex markets were largely flat with the offshore rate and the onshore rate trading around 6.5 per dollar.