China Reports Robust Economic Growth, While Risks Continue to Mount

China’s National Bureau of Statistics has announced that second quarter GDP growth in the country was a strong 6.9%, topping expectations.

Those growth figures, however, come with Premier Xi Jinping attending the National Financial Work Conference – held every five years – and letting others present clearly understand that he is not comfortable with the level of risk taking currently at play in the country. Several deal makers have recently found themselves on the defensive and in some cases selling assets to de-risk their balance sheets.

For a number of years, China maintained exceptionally strong economic growth by expanding its export sector and selling an increasing amount of goods to the West. But as Western demand softened and other countries competed away China’s advantage of cheap labor, recent growth has been buoyed by cheap credit and massive infrastructure spending.

As Chinese authorities clamp down on excessive credit creation, most forecasters expect growth in China to decelerate in coming quarters. The Telegraph of London, UK reported today that of particular concern to Xi was news that the shadow banking industry is now estimated to be far higher than it once was.

Smaller, technology related stocks crashed on Monday in China markets as investors digested the reality of tougher access to credit. The overall market was more stable, however, with the Hang Seng index of Hong Kong stocks rising 0.3% while the Shanghai Composite Index declined by 1.4%.

more recommended stories