SINGAPORE (Apr 22): As China posts yet another quarter of 6%-plus growth, analysts have been quick to brand the latest upswing as a rebound. Buoyed by this year’s double-digit stock-market gains, large flows of credit and tax cuts for consumers, Beijing is trying to sell the narrative that growth remains stable.

Some official statistics seem to support that theory: GDP grew an annualised 6.4% in 1Q2019 from a year earlier. Retail sales rose 8.7% and factory output climbed 8.5%.

Dig beneath the headline data, though, and we get another story. Beijing has been flooding the market with credit, with total social financing up 40% so far this year. Notably, the source of funds is expanding beyond banks, indicating an uptick in shadow activity. Yet, fixed-asset investment is up only 6% from last year. That means loans are not heading into areas that will boost the real economy. Meanwhile, companies are not getting paid what they are owed and account receivables are building up.

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