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Has China’s Growth Finally Stabilized?

Tuesday January 2, 2018 comments

Though China’s financial system is fraught with vulnerabilities, many economists believe that the country has at last entered a new period of stable growth of about 6.5% per year – an assessment echoed by the IMF. Given slowing fixed-asset investment growth, however, they would do well to rein in their expectations.

BEIJING – For the last decade or so, China’s economy has been on something of a roller coaster ride. As 2018 begins, is the country approaching a new ascent, a steep drop, or something in between?

Prior to the global economic crisis a decade ago, the Chinese economy was growing at a breakneck pace. But when the crisis hit, the growth rate fell relatively sharply. Thanks to a $4 trillion stimulus package, growth soon reached its trough and began to climb again, reaching 12.2% year on year in the first quarter of 2010.

Soon after, however, monetary tightening put economic growth back on a downward trajectory, spurring the government to loosen policy and introduce mini-stimulus packages in late 2011 and early 2012. This produced a short-lived and moderate rebound, with economic growth again beginning to slide, albeit less steeply, soon after.

Finally, in 2016, Chinese economic growth began to stabilize again, with the annual rate reaching 6.7% for three quarters in a row. The latest figures show that China’s economy grew by 6.8% in the third quarter of 2017, leading many economists to offer rather optimistic forecasts for the coming year.