China's economy stabilizes after Beijing opens Bank Vaults

BEIJING – China's economy stabilized in the first three months of the year, according to official figures released on Wednesday, after Beijing flooded the financial system with money in an whatever-it-taking approach to arresting a slowdown.

Officials said the Chinese economy, the world's second largest, grew 6.4 percent in the first quarter of the year compared to the same period in 2018. The pace was the same as in the fourth quarter, as growth suffered as buyers paired back, the stock market was random and private businesses used for help.

While economists generally look at China's economic figures with skepticism, they point to other signs that the country's current slowdown may have reached its bottom. Other figures suggest that consumers are back on the till, factory production is picking up and the world, after several tough months, is buying more Chinese goods. Beijing needs such hopeful signs as it attempts to reach a trade agreement with the Trump administration while under pressure to raise the conditions at home.

Economic growth so far this year "laid a good foundation for stable and healthy economic development throughout the year," said Mao Shengyong, spokesman for the National Bureau of Statistics.

There is a warning: The signs of improvement probably do not come from a Sudden outbreak of the strength of the nation's economy among Chinese business leaders

Instead, the positive mica is largely a product of the hundreds of billions of dollars that Beijing has pumped into its economy over the past few months, and the loans that officials have pushed state banks to All this comes at a price and it raises a question of how willing Beijing will use to keep the growth going.

"This time, they used an overwhelming amount of power to boost the economy," Larry Hu said. in China at Macquarie Group, said. "That is why the economy stabilized in the first quarter."

The possibility of a "double dip", where growth is falling again before picking up down this year, is high, Hu said. "The recovery is not so solid," he said. "They defended the gun at the beginning of the year."

In many ways, China's political decision-makers go back to an earlier approach: distributing multiple loans in exchange for a short-term increase in confidence. The strategy helped keep growth up over the past decade, even after the global financial crisis in 2008. But it left the country confusing in debt that threatens to hamper the economy for years to come.

In the early years of China's boom, companies and local governments could borrow liberally to know that accelerating growth could help ensure that their gamblers paid off. Now that the country's economy is big and mature, it has become increasingly difficult for China to simply grow its way out of its debt.

"China is already in the middle of the largest credit bubble the world has ever seen," said Victor Shih, a lecturer at the University of California, San Diego. And Professor Shih added, the Chinese government has not been able to deviate from its debt habits.

"The government simply cannot afford to think in the medium term and must focus on the short-term continuation of the credit bubble" He said.

The last round of state-run financial grandeur was remarkable in size and scale, economists said.

The broadest target for new borrowing in China, known as total social funding, jumped to $ 1.2 trillion in the first quarter, while bank lending hit record highs of $ 865 billion, according to Mr. Hu at Macquarie Group.

Local government encouraged by the state increased $ 100 billion in new money through special bonds, compared to just $ 11.5 billion in the first quarter last year, when the same local government was hidden to borrow too much and hid its debts.

This money began to appear in the financial data on Wednesday, with spending on massive infrastructure Projects such as customs roads and new metro lines are increasing by 6.3 percent.

On Tuesday, the Organization for Economic Cooperation and Development warned of the potential dangers of such a heavy borrowing, and said it could provide greater economic imbalances in the future. The organization revised the outlook for China's growth to 6.2 percent this year and 6 percent for 2020, citing increased housing collapse risks and growing geopolitical tensions.

Even though it is struggling through an economic downturn, China is a "major driver of world economic growth," said Ludger Schuknecht, the organization's deputy secretary, in a report. external challenges to maintain its strong position in the long term "Schuknecht said. The organization also warns that the country's trade war with the United States will weigh on exports and general growth.

As it seeks engines to drive global growth, the world needs China to pull Last year, Beijing reported that growth was softened to its slower pace since 1990, among other things by the evidence that the trade war was already beginning to take a twelve spooking investors.New export orders fell to multi-year downs and the factories were cut to cut overtime and send workers home early before the Chinese holiday season.

Businesses seemed to have more resources to hire and expand in the first three of the year Part of this was the result of a promise by last year by the central bank to pump $ 175 billion into the system, mostly to help small and medium-sized businesses.