China's recovery from its longest slowdown in growth since the global financial crisis is being driven by the two forces posing the biggest risks to the economy's increasingly urgent need to rebalance - investment and property.
The central government wants to raise consumption's share in the economy as the cornerstone effort to close one of the world's widest gaps between rich and poor and quell the discontent among those Chinese who feel they missed out on the country's blistering expansion of the past three decades.
The economy picked up in the fourth quarter as a spurt of infrastructure spending orchestrated by Beijing broke seven straight quarters of a slowdown. Consumption's contribution to growth fell in the fourth quarter for the third straight quarter even though retail sales were rising in each of the last three months.
Short-term policies to drive the recovery may well explain that because the biggest improvements were real estate-related, casting doubt on whether Xi Jinping and Li Keqiang - President- and Premier-in-waiting, respectively - can really rebalance the economy and lever its giant size to deliver widespread wealth.
"While the recent turn in the economy is real, the true test for China's new leadership is not whether they can manage the cycle, but whether they can put longer-term growth on a stronger footing," Janet Zhang, an analyst at consultancy, GK Dragonomics, wrote in a note to clients.
Dependence on investment spending - now at around 50% of GDP - for three decades of development has created huge industrial overcapacity in China, eroding economic efficiency despite some of the world's lowest labour costs and requiring increasing amounts of capital to deliver diminishing returns.
That worries investors and makes the International Monetary Fund fret about the risk of a capacity glut that could have global consequences.
Analysis by HSBC shows investment growth is contributing more to the economy than at any time since 2009 - the year in which China injected the bulk of a 4 trillion yuan stimulus to counter the impact of the global financial crisis.
Economists at UBS noted meanwhile that growth in December's retail sales may have been stronger-than-expected at an eight-month high of 15.2% year-on-year, but the pick up was on household goods, furniture and construction materials tied to rising property transactions.
It serves to emphasise how hard it is for Beijing to shift the economy's underlying growth drivers.
Consumption might have been the biggest single contributor to 2012's full-year GDP growth of 7.8%, but its 51.8% share remains far below the 70-80% typical in developed rich economies.
Wealth Gap
Spreading the benefits of China's ascent to its position as a global economic powerhouse is seen as the best way of quelling the risk of revolt. Even a newly recalibrated official index last week indicated the wealth gap was so wide that serious social dissatisfaction may be brewing.
Chinese officials are likely to be agonising anew over the headstrong property market in the wake of GDP data that showed fourth-quarter growth rebounding to a stronger-than-expected 7.9% alongside a pronounced upswing in real estate sales, housing starts, investment and home prices.
Real estate is a hot-button topic for the government because many Chinese complain that prices are out of their reach.
House prices in their own central Beijing backyard are zooming towards record highs, despite three years of steady policy action to rein-in rises and stifle speculation.
Apartments in the Champion Court housing estate that is a 15-minute walk from the headquarters of the People's Bank of China are selling at all-time-high prices of between 80,000-100,000 yuan per square metre.
Prices have jumped 10% in the past year, data from China's largest online real estate firm Soufun Holdings showed, as Champion Court's proximity to China's financial centre draw buyers who think they can benefit from its location.
Official data shows monthly rises in the country's top 70 cities for five of the last six months, the latest in December.
"To be honest, I think prices are unthinkable," said a property agent surnamed Jin who declined to give his full name.
Jin's firm specialises in property in Beijing's financial district and around 60% of the homes it sells are paid for immediately in cash, he said.
Champion Court's eye-watering prices belie a dreary exterior, suggesting Beijing faces a long slog in curbing property inflation despite limits on home purchases and hefty downpayment rules.
An 80-square-metre (860 sq ft), one-bedroom Champion Court flat was on the market last week for 7.2 million yuan when Reuters visited. The bathroom had a rusty tub and a hole in the wall.
Built in 2004, the price of Champion Court apartments - which give buyers 61 years of ownership rights - have galloped 10-fold since, said Zeng, a property agent who also declined to give her full name.
Urban Legend
Contrary to urban Chinese legend that blames coal mine bosses for driving up house prices with their newly-minted wealth, Zeng, whose office is near Champion Court, said owners are bankers or civil servants working in the financial district.
"It's supposed to be the lull season in the property market now but we can't feel the lull this year," she said, adding that her firm sold a 4.75 million yuan flat in 3-1/2 hours last week.
And even with Champion Court's record prices that are on par with those in France and Japan, it is not the priciest estate in town. Further west, giant luxury apartments at the Diaoyutai No 7 compound cost as much as 160,298 yuan per square metre.
China's average annual urban disposable income in 2012 was 24,565 yuan. Home prices meanwhile averaged 20,700 yuan per square metre in Beijing last year.
Accelerating property inflation could put the pressure on Beijing to tighten monetary policy before the year is up, a move that carries risks given China is only just recovering from its worst full-year of growth in 2012 in 13 years.
The upside for now is that the recovery is taking hold and that, by common consensus, China has successfully avoided a so-called economic hard landing that many analysts said would have rippled across the global economy.
Neither can it be ignored that consumption was the biggest component of the economy in 2012, nor, as GK Dragonomics' Zhang observes, that household income growth outpaced GDP for only the third time in the past decade.
The downside is that recovery so far is underpinned by infrastructure projects and the property market. And that remains a concern for many analysts and investors.
"China faces the increasingly urgent task of rebalancing its economy away from investment and towards consumption," Andrew Colquhoun, senior director for sovereigns at ratings agency, Fitch, wrote in a note to clients.
"The data show limited progress so far."
