Debt appears to fuel Chinese stabilisation

China posted its slowest economic growth since 2009 but a surge of new debt appears to be fuelling a recovery in factory activity, investment and household spending in the world’s second largest economy.

That is good news in the near-term, economists say, but many worry it marks a return to the old playbook used during the financial crisis, when Beijing hand-cranked its economy out of a slowdown through massive stimulus, rather than structural reform.

Official data showed China’s gross domestic product grew at an annual rate of 6.7% in the first quarter of the year, easing slightly from 6.8% in the fourth quarter as expected. However, other indicators released showed new loans, retail sales, industrial output and fixed asset investment were all better than forecast.