A few months before the Communist Party Congress, this autumn, the authorities increase public investments.
With “only” 6.7% growth in 2016, China had its lowest performance in 26 years. But the prospect of the Congress of the Chinese Communist Party held in the autumn should boost these numbers. President Xi Jinping should be confirmed to his post for a further five-year term and the permanent political office will also be renewed.
Bringing back old recipes
Public support for the economy partly explains this rebound. In the first quarter, spending by the central government and local governments increased by 21% over one year. China’s industrial production grew by 7.6%, and investment in infrastructure surged 23.5%.
Investments in real estate rose 9.1%. The trend even accelerated in March, with an increase of nearly 12% in housing starts, which explains the record level of steel production.
Lastly, domestic consumption, which is a key factor in rebalancing the economic model encouraged by the authorities, is not to be outdone: retail sales rose last month by 10.9%, accelerating after an increase of 9, 5% in January-February.
The National Bureau of Statistics reports a powerful demand for home appliances, furnishings, and other items to develop new homes. Sales of cars also showed signs of recovery.
Fear of the bursting of a property bubble
The shadow of the Chinese economy is fueled by a rebound in China’s debt, which already exceeds 260% of GDP. Although bank lending declined sharply in March, credits associated with unregulated “shadow finance” (i.e., all credit mechanisms between firms and individuals) A record level.
Economists today believe that the overheating of the real estate market represents the single most important risk for Chinese growth. Doped by cheap credit, apartment purchases continue, despite strict restrictions in some twenty major cities, anxious to stop speculation. Last year, they had already taken action that had little effect.
Fight against corruption
However, the authorities are showing their willingness to continue the campaign against corruption, launched by Xi Jinping shortly after taking office in late 2012.
Xiang Junbo, chairman of the China Insurance Regulatory Authority, has been dismissed for alleged disciplinary offenses, reports the China News Agency on Monday (April 17th).
The Chinese anti-corruption authority announced on 9 April that an investigation would be opened for “serious disciplinary offenses” against him. It is the largest financial personality targeted to date in the government’s campaign against bad practices. Sixty-year-old Xiang Junbo was deputy governor of the People’s Bank of China and president of Agricultural Bank of China, one of China’s four major public banks.
The government’s website published a speech by Prime Minister Li Kequiang on Sunday (April the 17th), promising the utmost severity for “individual regulators and executives of companies that have embezzled money. Or have been guilty of collusion with financial moguls.”