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China's economic reforms have a long way to go

 

Ben Chu
Monday 20 January 2014 14:45 GMT
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As you were, apparently. China’s growth in 2013 was precisely the same as 2012, at 7.7 per cent.

The rate cooled slightly in the fourth quarter, but nothing dramatic or unexpected. So can we breathe easier over the prospects for world’s second largest economy? Sadly not. Beijing pumped up the economy last year with a mini investment splurge.

That was good for the gross domestic product numbers but bad for the economic re-balancing that everyone — from the Communist Party down — now accepts needs to take place in China.

The country is still over-investing and under-consuming. And credit is still flowing at a dangerous rate. Total debt in the economy has shot above 200 per cent of GDP. The financial system is fragile, with banks sitting on mountains of bad loans.

Beijing knows what it needs to do to make its growth sustainable. But the question remains: can it overcome the plethora of powerful vested interests that are profiting handsomely from the status quo?

The latest figures underscore what a long march lies ahead for Beijing’s reformers.

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