China still has the capacity for surprise. While growth is far slower than the clip that prevailed during the three-decade-long boom, recent data suggest a recovery of sorts might be in the offing. The health of global commerce hinges on whether this is a blip or heralds a return to a stronger footing.
Unfortunately, there was a rush to evaluate the indicators based on whether President Xi Jinping¡¯s target for gross domestic product will be met, missed or surpassed. Beijing¡¯s goals hinge on a metric that, at the best of times, has flaws. Underlying conditions matter more and the recent numbers are encouraging.
There are problems with looking at China¡¯s vitality through the GDP lens ¡ª the data is widely perceived to be finessed by officials. In a one-party state, the political incentives to achieving objectives set from the top are great, rarely more so than now. Leaders want an increase in GDP of around 5% in 2025 and are likely to, at least, come very close. As nice as that would be in a challenging global economy, it¡¯s a long way from a perfect report card. The real estate sector is still troubled, employment is lackluster and deflationary pressures persist.
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