Why is China such showing such small economic growth this quarter?
They understand that debt is growing more quickly than the economy. They are trying to address this. When they give less loans, they have difficulty achieving GDP and placating the many powerful competing interests in the society. GDP growth, unlike other countries, for China, is a system input rather than a system output. As the financial system is closed, most lending occurs between state owned enterprises (banks and industry) and the government freezes trading, or props up markets to avoid asset falls, and to support targeted industries and industrial players, any growth is theoretically achievable until one hits debt service carrying cost limits. So, they have understand for more than a decade that they had to get debt under control, and rebalance from investment to consumption driving economic growth. Problem is the same that has always been the same for China, the Emperor is far off, that is, make plans, but still local banks are under provincial and city leadership, the Provincial bosses and power players, important industries, often one in the same person, can force local banks to do what they desire, regardless of admonitions from Beijing. There has long been a battle between technocrats who rise through ministries and seek reform, and provincial party leadership who seek fast growth. The former wants reform, the latter wants GDP growth, and to rise through party ranks of success. Local offices of national ministries and even SOE’s have many masters to serve, not simply line superiors but also local party leaders who desire the spigots of credit to remain strongly open.
Center wants to reduce lending driving growth and rebalance to domestic drivers, consumption, rather than investment (invest for what, for how long, haven’t you done everything that was profitable).
So, when they try to get rebalancing, growth will slow, because the are trying to switch away from increasing debt to achieve high investment and higher growth, so necessarily will fall. Then they get frightened, and switch back.
If growth rebounds, means not rebalancing, and that Xi does not have the political backing and strength, despite multiple years of anti-graft purges to push through rebalancing. Before any all knowing Chinese commentators, comment to confuse those not cognizant, please review internal Chinese discussions on the topic of rebalancing before telling me, what I think is obvious, that you would like the uninformed to believe, about the Chinese economy and future (far better and more honest Chinese Academicians at CASS (and other bodies, and current and former PBOC officials, etc) are far more honest, or informed, than (whomever drives the likes of) you.