CHINA-FRANCE-DIPLOMACY
Is it still manipulation if I'm trying to support it?  Photograph by Fred Dufour—AFP/Getty Images

Is China’s Growth Unsustainable? Yes. Will It Stop? Nope.

Nov 14, 2016

The staff of Fortune is assembling its predictions for 2017 in our annual feature, the Fortune Crystal Ball, now on newsstands in the December 1 issue of the magazine. Here’s one of our forecasts.

Make no mistake, when President Xi Jinping last year called for GDP growth of at least 6.5% for the coming five years, China was signaling it would prop up growth by whatever means necessary.

Recently that meant a flood of debt the likes of which China has never seen. The domestic debt ratio rose by an astonishing 28% of Chinese GDP in the 12 months through June, a faster pace than even China’s 2008-09 stimulus boom, according to Emerging Advisors Group. Banks are under pressure to lend and Chinese companies are piling on debt.

As a result, real estate prices are up, GDP growth is hitting targets (though actual growth will be at least a full percentage point below the government’s official releases), and consumers are spending.

The boom can’t go on forever, but can for the short term.

For more on China, watch this Fortune video:

A version of this article appears in the December 1, 2016 issue of Fortune with the headline "China Keeps Booming."

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