Reuters - Video

Edition: US | UK | IN | CN | JP

Business

What lies beneath China's 6.7% GDP growth

Wednesday, October 19, 2016 - 01:52

China has unveiled third quarter GDP in line with expectations, a sign the world's number 2 economy may be stabilizing. But as Tara Joseph reports, soaring debt and a property buying boom remain a major worry.

▲ Hide Transcript

View Transcript

Steady growth on the surface... China posting a six-point-seven percent rise for third quarter GDP on Wednesday - in line with government goals and investor expectations. But it's what lies beneath that number that's cause for concern. Urban home prices have skyrocketed in China over the past year - forcing Beijing to step in with buying restrictions to prevent the bubble from bursting. (SOUNDBITE) (Mandarin) SPOKESMAN FROM THE NATIONAL BUREAU OF STATISTICS, SHENG LAIYUN, SAYING: "Based on data for the first half of October the adjustment and control policies have borne initial fruit in some of the hottest cities. The property prices have experienced a narrow decline." Property makes up around 15 percent of the country's GDP and analysts fear that a major correction could pose a serious risk to the economy. A housing boom may be good for growth, but it's also a big part of China's whopping debt problem. Companies are sitting on 18 trillion dollars worth of loans, which Beijing knows it needs to cut... But that will almost certainly mean slower economic activity - at least for a while. (SOUNDBITE) (English) CITY INDEX, RESEARCH DIRECTOR, KATHLEEN BROOKS, SAYING: "Essentially it's like turning a juggernaut around. It definitely has focussed a lot more on domestic demand but equally it now comes up against the challenges of having an economy that's linked to domestic demand." On the factory floors, China's also at odds with painful reforms like slashing overcapacity in massive state-owned enterprises... making layoffs and debt defaults a worrying reality. Six percent plus may still be an enviable GDP figure by most countries' standards... But behind practically every force propping up Chinese growth... Problems and challenges are piling up... and threatening a fragile economy.

Press CTRL+C (Windows), CMD+C (Mac), or long-press the URL below on your mobile device to copy the code

What lies beneath China's 6.7% GDP growth

Wednesday, October 19, 2016 - 01:52