China seen posting steady fourth quarter GDP growth of 6.7 percent

Thu Jan 19, 2017 6:08pm EST
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By Kevin Yao

BEIJING (Reuters) - Boosted by higher government spending and record bank lending, China is expected to report on Friday that its economy grew by a steady 6.7 percent in the fourth quarter, giving it a solid tailwind heading into what is expected to be a turbulent 2017.

But Beijing's decision to double down on spending to meetits official growth target may have come at a high price, aspolicymakers will have their hands full this year trying todefuse financial risks created by an explosive growth in debt.

The world's second-largest economy also faces increased uncertainties from a cooling housing market and the government's bid to push through painful structural reforms, which could help deal with the root-cause of rising debt and housing risks but may weigh on near-term growth.

China's sluggish exports also could come under freshpressure this year if U.S. President-elect Donald Trump follows through on pledges to impose tough protectionist measures.

"While Chinese growth looks stable into early 2017, a moremarked slowdown by the second quarter appears inevitable," GeneFrieda, global emerging markets strategist at asset managementgiant PIMCO, said in a note this week.

"Growth has been stabilized only after massive fiscal andcredit stimulus. China’s total government and private sectordebt will likely surpass 285 percent of GDP this year, a 90percent increase since 2008."

While China's economy appears to be on much better footing than a year ago, the expected fourth-quarter growth rate would still be near the weakest since the global crisis.

Economists polled by Reuters estimated GDP grew 1.7 percent in October-December from the previous three-month period, versus 1.8 percent in July-October.   Continued...

Workers build scaffolding at a construction site on a hazy day in Beijing, China, December 31, 2016.  REUTERS/Thomas Peter