Credit offers a lower return:
The government’s broadest measure of credit rose 58 percent to a record 6.16 trillion yuan ($1 trillion) in January-to-March, when gross domestic product gained 7.7 percent, compared with 8.1 percent a year earlier. Each $1 in credit firepower added the equivalent of 17 cents in GDP, down from 29 cents last year and 83 cents in 2007, when global money markets began to freeze, according to data compiled by Bloomberg.
Meanwhile, overall growth is down, and government economists’ forecasts are likely too optimistic:
Li said this week that 7 percent average annual growth is needed this decade as the country seeks to double per-capita income. That’s lower than the 7.5 percent target the government set in March for this year.
Forty-one percent of respondents in a Bloomberg global poll of investors this month saw China’s average growth rate falling to 6 percent to 7 percent over the next five years, while 18 percent said it will slump to less than 6 percent. Even with an 81 percent increase in credit in April from a year earlier, manufacturing contracted in May for the first time in seven months, according to the preliminary reading of a Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics.
Via China Failure to Grow With $1 Trillion Credit Seen as Li Warning – Bloomberg.