China growth might hide long-term risks

China’s intention to hold up headline growth figures might boost long-term risks for the number two economy as ratings agency Moody's Investor Services stressed on Thursday.       

In spite of the fact the ratings agency has kept its growth prediction for China intact at 6.3% for this year, it informed that headline growth keeps to be backed up by surging amounts of debt, which could generate more problems.    

Delivering target headline growth rates as the number one objective could worsen the overall quality of growth because of further misallocation of resources. This would undoubtedly restrict the authorities’ ability to handle imbalances in the national economy via implementation of reforms.   

By the way, this year China dared to increase its economic growth target to 7% from 6.5%, after last year growth slumped to 6.9%, the country’s 25-year low. However, some economists consider real growth rates are much lower than officially declared.    

Policymakers have already told they are going to avert systemic financial risks, but growing concerns at top government levels regarding the dangers of excessive leverage seems to be growing.

Scroll to top