China’s economic challenges and risks are expected to mount this year as the country continues to pump in credit to keep growth from skidding to a halt.

After last year’s gross domestic product growth of 6.7%, the International Monetary Fund upgraded its 2017 forecast to 6.5 % – 0.3% higher than its October 2016 estimate – on the back of continued government stimulus and new loan growth. The figure matches those issued by the World Bank and Chinese Academy of Social Sciences.

Global – and Asia-Pacific growth – is dependent on stability in China, according to a recent report by Swiss investment bank Credit Suisse. “China, together with emerging Asia, has recently contributed up to 40% to global growth,” the report, Investment Outlook 2017: Conflict of Generations, noted.

“In this region, momentum also began to improve in the second half of 2016 and we expect it to continue into 2017,” the report added. “The key reason is that the Chinese government has significantly boosted infrastructure spending while relaxing monetary and credit conditions.”

China’s economic growth faces a long-term downward trend, based on analysis by the Organisation for Economic Co-operation and Development, but that slower overall growth is still enough to sustain increases in the spending potential of China’s middle- and upper-income segments.

“The government will institute policies such as infrastructure stimulus, looser property restrictions, and promotion of consumption to support the economy,” Francis Cheung, head of China and Hong Kong strategy at investment bank CLSA, forecast in a recent report.

While such expansionary policies are propping up growth, Cheung noted, there has been little attempt to address structural reforms related to demographics, productivity, bureaucracy, competition, overcapacity and, of course, debt. The economy remains too dependent on debt-funded infrastructure spending.

Many experts fear that growth is being propped up with more debt, raising the long-term risks. However, last year the public sector led the expansion in borrowing, allowing for some overly indebted private-sector companies to deleverage or exit industries with supply gluts.

Global bank HSBC forecasts that private investment will be reinvigorated in 2017 by the removal of entry restrictions in some service industries and expects the performance of Chinese equities to be driven by earnings growth.

The main downside risks remain the possibility of a rapid increase in the number of non-performing corporate and real estate loans, combined with a slowdown in consumer spending, hindering the rebalancing of China’s economy from industry and investment toward services and consumption.

Currency depreciation concerns will continue in 2017. Scotiabank Senior International Economist Tuuli McCully expects the renminbi to close out next year at 7.30 per U.S. dollar, close to 5% weaker than the end-2016 level. “The weakening pressure reflects sizeable capital flows out of China, mainly due to depreciation, substantial growth in the money supply and limited attractive investment alternatives domestically,” McCully said.

The administration of U.S. President Donald Trump could create uncertainties for China’s economic outlook. McCully noted that any trade policy changes that result in increased protectionism by the U.S., such as high tariffs on Chinese imports, would adversely impact China’s growth.

Ada Zheng Xin is a master's degree candidate at the University of Hong Kong's Journalism and Media Studies Centre.