When China’s stock market and currency both plunged last January, many global investors assumed the end was near. After years of debt-fuelled stimulus used to fund investment in housing, infrastructure and excess manufacturing capacity, many believed the bubble was finally bursting. 

It didn’t. China’s economy is expected to have met the government’s target of at least 6.5 per cent growth of gross domestic product for 2016. The stock market has stabilised and is up 19 per cent since its low point in late January 2016. Rising commodity prices have pulled factory-gate prices back into positive territory after more than four years of deflation. The currency has continued its decline, but in an orderly manner.

Yet few think that China’s fundamental economic challenges have been addressed. The relatively strong growth performance came at the cost of adding further leverage to the economy and falling back on smokestack industries to drive growth. Many economists believe that by pursuing overly ambitious short-term growth targets while delaying necessary but painful reforms, policymakers are only storing up trouble.