BEIJING • China is ending the year with its old growth engines roaring and new drivers like consumption in robust health, defying the prophets of doom yet again.
Now, it confronts 2017 with fresh questions over the debt and stimulus underpinning that stabilisation.
Industrial output and fixed-asset investment maintained brisk expansions last month and retail sales accelerated, data released on Tuesday shows. That has led to an overall expansion of about 7 per cent, according to a monthly tracker from Bloomberg Intelligence.
Aside from managing its ballooning debt load, China also faces a 2017 fraught with challenges - from potential confrontations with the Donald Trump administration over trade and Taiwan to the possibility that rising US interest rates accelerate capital outflows.
As the government prepares for an annual economic conference, the economy - for now at least - is in a sweet spot that has given policymakers space to selectively tighten liquidity and begin to clamp down on surging property prices.
"Compared with January, when people thought China was having a hard landing and capital outflows were huge, this year is way better than expected," said Mr Larry Hu, head of China economics at Macquarie Securities in Hong Kong. "On the other hand, growth is still driven by the old economy, property. These numbers aren't going to last forever."
• State-owned investment was up 20.2 per cent in the first 11 months year on year.
• Fiscal spending rose 12.2 per cent last month from a year earlier.
• Exports have been cushioned by a weaker yuan and factory prices have snapped out of their deflationary funk.
• Economy's expansion landed smack in the middle of the government's 6.5 per cent to 7 per cent full-year objective.
• Stimulus may be needed to offset the likely drag on growth from curbs on home sales.
• Real estate investment is estimated to slow to 1 per cent next year from 8 per cent this year, resulting in a 1 percentage point drag on growth.
• Expiring car tax breaks will weigh on retail sales.
• Capital outflows may rise due to rising US interest rates.
• Managing its ballooning debt load will be a challenge, as will be potential confrontations with the new Donald Trump administration over trade.
Tuesday's data showed an acceleration of retail sales, with help from car sales as buyers rushed to capitalise before tax incentives on purchases expire. Online sales also quickened last month, boosted by shopping bonanza Singles Day on Nov 11.
But state-owned firms and infrastructure investment still did most of the heavy lifting. State-owned investment was up 20.2 per cent in the first 11 months from a year before and November fiscal spending rose 12.2 per cent from a year ago.
Meantime, exports have been cushioned by a weaker yuan and factory prices have snapped out of their deflationary funk, leaving the economy's expansion on pace to land smack in the middle of the government's 6.5 per cent to 7 per cent full-year objective.
With a crucial Communist Party Congress scheduled for late next year, policymakers are committed to providing enough stimulus to underpin a target for average annual growth of at least 6.5 per cent to 2020. The downside of that is an ever increasing debt burden, with its risks deferred to the future.
"Policy support was financed by more debt, which worries investors," said head of China economic research Wang Tao at UBS Group in Hong Kong. The "property rally also made domestic residents concerned about a property bubble".
Stimulus also may be needed next year to offset the likely drag on growth from curbs on home sales. Mr Tom Orlik, chief Asia economist for Bloomberg Intelligence in Beijing, estimates that real estate investment will slow to 1 per cent next year from 8 per cent this year, resulting in a 1 percentage point drag on growth. Expiring car tax breaks will weigh on retail sales too.
"The revival in growth has come once again from the clanking, energy-intensive industrial sector," Mr Orlik wrote in a report.
"How long does China have in this sweet spot of resilient growth and far-sighted policy? With risks from trade, real estate and autos looming, the answer might be 'not very long'."