Now that China’s economy has undeniably rebounded in 2016, instead of falling into deeper chaos, the question is how long the upturn can last.
After all, there’s a direct cause between the Chinese government’s stimulus efforts and the economic upturn. Construction and investment by the state sector—two proxies for stimulus—have boomed as the central bank cut rates for more than a year and expanded credit by almost $1 trillion in the first quarter.
The guess of how long the rebound lasts from one researcher is through the end of the year. Mark Williams, London-based Capital Economics’ chief China economist, says the lag time between policy easing and growth is about six months. Because the money boosting the state sector must be used by the middle of this year, according to the government, Williams says the short-term kick to the economy should last through the end of the year. “But it may not continue much beyond that,” he writes.
The government is aware of worries about China’s accumulated debt, some 240% of GDP. There are already reports in the Chinese press about China’s central bank telling banks to slow the pace of their lending.
Still, China’s economy has picked up for now: Capital Economics approximates China’s real economic growth instead of relying on the government’s quarterly figures, which are widely thought to be manipulated. In the first quarter, its index showed 4.8% growth—less than the government’s official release of 6.7% growth, but the highest rate Capital Economics’ index had measured since the end of 2014.
