But Beijing’s massive trade surpluses angered its trading partners, and many state-funded investments, especially in infrastructure such as roads, airports, and industrial development zones, have not turned out to be very profitable.
That has especially been the case with projects launched helter-skelter in 2009 and 2010 as part of the $600 billion stimulus package that the government used to escape the worst of the 2008 financial crisis.
The authorities pumped so much money into the economy that it began to overheat, sparking inflation above 5 percent a year, so last year the government curbed lending sharply, forbidding local governments to take out more loans.
“The reason for this turn in the business cycle is the government’s determination to end the stimulus policy and bring down inflation,” says Andrew Batson, an analyst with the Beijing-based Dragonomics consultancy.
“Cycles in the Chinese economy over the past four or five years have been very much policy driven,” Mr. Batson adds. “I don’t think a month or two of bad economic data means the government has lost its ability to manage things.”
Officials here have been pledging for some time that they will seek to rebalance the Chinese economy, making it less reliant on exports and investment, and more dependent on domestic consumption. That would please US and European governments, anxious to export more of their own goods to Chinese consumers.
But making that transition is “a tricky balancing act,” says Batson. Domestic consumption is less easy to goose than investment spending, which can be ordered by government fiat.
If cuts in investment meant a serious economic slowdown before domestic consumption picked up significantly “there is a question whether they would be politically feasible,” says Victor Shih, who teaches Chinese politics at Northwestern University in Evanston, Il.