Too close to the state to fail

Fathom Consulting // Insights // Too close to the state to fail

The China Momentum Indicator 2.0, Fathom’s measure of economic activity in China, rose to 7.3% in August. The pace of growth has almost tripled in the last two years. Unable to tolerate the slowdown associated with a rebalancing, which could threaten the position of President Xi Jinping, the Chinese authorities have recommitted to the model of export- and investment-led growth. This means more credit being channelled to unproductive industrial state-owned enterprises, of which one in three are operating at a loss. The state’s preference for maintaining social stability, rather than…