With construction cranes moving again all across China, from Guangzhou
to Beijing, and with steel mills and concrete factories busy once more,
the Chinese economy is showing signs of a debt-fueled recovery this autumn even as the United States and the European Union continue to struggle.
But while many economists and business executives say that Chinese
economic data appears to have been deliberately altered over the spring
and summer to hide the severity of an economic slowdown, they expressed
more confidence that the economy was now on the mend.
Industrial production, fixed-asset investment, retail sales and
electricity generation all strengthened more than expected last month,
continuing a trend that began in September, while inflation
slowed more than expected. State-owned banks have released a torrent of
loans to state-owned enterprises since May, producing a swift revival
of investment spending this fall but also raising questions about the
efficiency of those investments.
An aging
work force, overcapacity in many industries and heavy corporate debts
appear to be producing a weaker recovery than in 2010, however, with
little sign that the encouraging economic indicators released on Friday
point to growth rates that will reach double digits again anytime soon.
"Given that they have been published while the Party Congress is in
session, some skeptics have questioned whether they can be believed,"
Capital Economics, a London consulting firm, said in a research note.
"In our view, there is solid evidence of a turnaround but not of a
strong rebound."
Many worries persist about the sustainability of even a modest recovery
heavily reliant on debt. Chinese banks are lending at such a brisk pace
that by the end of next year they will have expanded their balance
sheets in just five years by an amount equal to the combined balance
sheets of the entire U.S. commercial banking system, according to Fitch
Ratings. Yet China's economy is only half the size of the U.S. economy.
Each
extra dollar of lending since 2008 has produced less than half as much
extra economic growth as before the global financial crisis. State-owned
enterprises have finished urgent tasks like building enough steel mills
to meet domestic demand and are now investing in fewer and fewer
economically viable projects to sustain economic activity.
