China's economy continues to be a major source of uncertainty for global growth this year. Its 6.7 percent expansion in 2016 was within the range of Beijing's target and may appear to be steadily on course to a slower but more stable growth. But the world's second-largest economy is confronted with two key risks — the fall of its yuan currency and mounting private-sector debts, which if mishandled could trigger a serious crisis. Possible trade friction with the United States under new President Donald Trump, who views China as a key culprit for the loss of American manufacturing jobs, also clouds its prospects. Policymakers in Beijing need to take utmost care in steering the economy through its problems.
The annual growth in China's gross domestic product was the slowest since 1990, when the economy grew a mere 3.9 percent under the weight of international sanctions imposed in the wake of the Tiananmen Square incident of 1989. President Xi Jinping, when he spoke earlier this month at the World Economic Forum meeting in Davos, Switzerland, tried to dispel concerns over the slowing growth by saying the Chinese economy is in a "new normal" driven by household spending. True, the GDP figure was within the government's target of a 6.5 to 7 percent growth. The economy grew faster in the October-December period than in the previous quarter, and deflation concerns are receding, with consumer prices in December rising 2.1 percent from a year ago. Officials say the growth is within a reasonable range and that the economy's structure is also improving, with the services sector accounting for an increasing portion of the total.
Still, the 2016 growth paints an unhealthy picture of the economy. Slowdown in private-sector investments dragged down the economy, but government stimulus such as public works spending and an overheated real estate market shored up its growth. Fixed asset investments grew 8.1 percent — compared with 10 percent growth in 2015 and the slowest in 17 years. Growth in private-sector investments sharply decelerated from 10.1 percent to 3.2 percent, which was partly offset by increased government spending.