Beijing's efforts to hasten growth flopped in July, as factory output, investment and retail sales disappointed — and it's a good thing.
As this column has argued before, any sign President Xi Jinping is tolerating slower growth could be a harbinger of major economic change. I know that the reflex among investors is to panic about losing one of the few engines propping up global growth and pine for more stimulus. But the closer gross domestic product is to 6.5 percent, this year's target, the less Xi is doing to curb China's excesses and avoid a debt crisis.
It's always dicey to put too much weight on one batch of data. The 6 percent rise in industrial production, 10.2 percent gain in retail sales and 8.1 percent increase in fixed-asset investment in the first seven months of 2016 do indeed suggest a downshift is afoot. Even more persuasive, though, is a recent analysis by UBS looking at 765 mainland banks. It finds that in their efforts to clean up balance sheets, banks disposed of about $271 billion of dodgy loans between 2013 and 2015, while they raised roughly $94 billion of capital. Baby steps for sure, considering China's $10 trillion economy, but welcome signs that bank bailouts and recapitalizations are afoot.