What is behind the 6.7% Chinese GDP growth?

The Chinese economy is reported to grow 6.7% in the second quarter. Such growth is backed by a surge in infrastructure investment by state-owned businesses. This figure shows the Chinese economy's upside and downside. Firstly, there are several disappointing factors that the private investment has no growth this quarter and the investment in some industries such as mining has negative growth. Moreover, the local government debt is another danger to the Chinese economy, as the total number of the local government debts is 25 trillion RMB, which is similar to the German GDP. The increase in infrastructure can increase the local government debts, as the infrastructure is conducted by state-owned businesses which receive subsidies from the government and local authorities that usually come from borrowing. In addition, the increase in the investment in infrastructure could widen the wealth gap as the payment difference is very wide in the construction industry. However, there are some upside factors about the increase in the investment in infrastructure. The improved infrastructure can bring more investment and generate regional economic growth. Moreover, an increase in investment can speed up invention and innovation, leading to improvement in technologies in infrastructure. This can increase the Chinese exports of infrastructure construction, especially when many developed as well as developing countries need to upgrade their infrastructure or build their infrastructure. In addition, the 6.7% figure can restore some market confidence, which help to stabilize the market. To conclude, the Chinese economy has many positive momentum, such as high investment in some new industries, but is still very dependent on government investment, including investment from the central government as well the local authorities. In order to stabilize the economy, the government has to ensure its own financial stability first.