Hi Yuval, Over the past few months I've posted at length on this topic, so by definition the way the gov't hits the GDP target is by looking at private growth, and then ordering the SOE's to invest enough in order to reach bridge the gap between private growth and the target for that year. The SOE activity is basically in infrastructure (infrastructure spending is around 20% of their economic activity as a whole, and a much higher % of SOE activity, and is controlled by the government so is the main mechanism they use to achieve "growth targets"). So the only way a growth target wouldn't lead to more debt is if there are a massive number of easily identifiable infrastructure projects for the government to invest in. However, given that essentially every major populated area (with rare exceptions like the Nantong corridor outside Shanghai that only now is getting rail) already has first-class infrastructure, access to electricity, air travel, everything they need--or, to put it another way, they have already built up over the past 20-30 years a world-class infrastructure, so by definition they simply need to maintain it, not build it, which means they don't need as many big infrastructure companies as they did when they were building it all up. That should be obvious.

However, consumption is still just 38% of GDP, so by definition investment--especially infrastructure investment--remains just as large a part of their economic activity as ever. So the only two ways that GDP target would NOT lead to sharply rising bad debt (as new investment projects aren't productive so can't pay back the bank loans which fund them) as either, as I've said, if there are a massive number of easily identifiable infrastructure projects available (there aren't), or if they manage to rebalance the economy by increasing consumption's share of GDP--but this is politically difficult since so much of the investment is controlled by elite Communist families, and they aren't that excited about giving up their wealth and influence. This is a common story in investment-led growth models like China's (there are 2 dozen examples from the 20th century of the same model).