Boom or bust? The big debate raging over China’s economic future
S&P’s downgrade of the mainland’s credit rating casts a shadow over Beijing’s rosy growth picture
Everything was not only under control, China’s 6.9 per cent growth in the first half was of higher quality and efficiency, the country’s powerful economic planning agency insisted at length on Thursday.
The economy was balancing out, with services and domestic demand taking over some of the growth slack from industrial production and exports, the National Development and Reform Commission said.
But just hours later S&P Global Ratings downgraded China’s sovereign rating for the first time since 1999, citing the country’s greater economic and financial risks.
After “a prolonged period of strong credit growth”, S&P said, China’s credit growth in the next two to three years “will remain at levels that will increase financial risks gradually”.
The contrast reignited debate over the fundamentals of China’s future – whether the country is leaping over the middle-income trap with a leaner and more sustainable growth model or whether it is on a debt-fuelled path to disaster.
The clash of opinions could not have come at a worse time for the leadership in Beijing. The country’s political elite have been trying to paint a rosy picture of the economy ahead of next month’s five-yearly Communist Party congress, putting the dark days of the last two years’ stock market rout and exodus of funds behind them.