To the absolute surprise of no one, Chinese economic growth came in at an annualised growth rate of 6.7 per cent in 2016.

There was a moderate surprise that annualised fourth quarter figure came in at 6.8 per cent, but not enough to shift sentiment significantly.

By happy coincidence the 2016 result not only lines up with President Xi Jinping's call at the World Economic Forum in Davos that it would be thereabouts, but also is right in the middle of the 6.5 to 7 per cent target band drummed up at the National People's Congress in March last year.

The quality of Chinese GDP data is often questioned, given the National Bureau of Statistics can pull together all the threads of the world's second biggest economy into a coherent narrative just three weeks after the quarter ends.

The admission this week from the boss of Liaoning province that the GDP books for his steel and coal-dominated jurisdiction had been cooked for years has not helped matters.

The National Audit Office found revenues from Liaoning's industries and state-owned enterprises were at least 20 per cent higher than what should have been reported between 2011 and 2014, with 2013 representing the peak in creative accounting for one area at 130 per cent over the odds.

To be fair, the practice appears to be frowned on.

The head of the NBS seems to be getting grumpy with this suspect reputation, warning local officials - who funnel the raw data to the central statisticians and whose chances of promotion are linked to meeting economic targets - dodgy accounting is a very serious offence and culprits would be punished.

The old boss in Liaoning who was allegedly responsible for overstating the industriousness of his patch has been arrested and is facing a trial later this month.

Liaoning, now equipped with a fresh and more credible approach to statistics, is the first and still only province to have fessed up to sliding into recession in 2016.

China's growth rate slows as economy grows

Despite the dubious nature of the numbers a trend has been established; China's economic growth is slowing.

For the past six years, since GDP growth came in at 10.6 per cent in 2010, the economy has been steadily decelerating.

Growth last year was slower than at any time since 1990.

Much of that is due to the fact that the economy is that much bigger.

However, authorities are quite accepting of the inevitability of the situation.

As the chief of China's National Development and Reform Commission, Xu Shaoshi, recently pointed out, a 6.7 per cent - or 5 trillion yuan ($1 trillion) - expansion in 2016 equated to growth of 10 per cent in 2011.

A new target of 6.5 per cent expected for 2017

Reuters reported this week a closed door meeting of the Central Economic Work Conference has targeted GDP growth of 6.5 per cent in 2017 - another stepdown in pace.

Such a target would be keeping with China's central bank signalling it was shifting away from stimulating the economy to a "neutral" monetary policy late last year.

The implication of that change in stance is there is a determination by authorities to deflate asset bubbles and rein-in burgeoning debt.

The shift to "neutral"

Inflation is starting to pick up. Producer prices jumped by an unexpectedly high annual rate of 5.5 per cent last month, driven a surge in coal, steel and metal prices.

The steady depreciation of the Chinese currency has also played its part, as has a booming, debt-financed property market.

All of this points to more buoyant industrial profits, which should help support growth.

However, even managing a further slowdown to 6.5 per cent would still require a substantial contribution from the state, despite its now "neutral" stance.

The big contributors to growth in 2016 - housing and automobiles - benefited from various stimulatory packages, such as tax discounts on low-emission cars.

Together they account for more than 15 per cent of GDP, so any slippage - such as more bubble-busting regulations in the property market - would have a very large impact on China's ability to hit its self-imposed target.

Standing still will cost more

A recent note from Societe Generale's China economist Wei Yao pointed out, while the fiscal push from the Government last year was already very sizeable, it will need to be even bigger to maintain growth at 6.5 per cent in 2017.

Something in the order of 14 trillion yuan ($2.7 trillion) in new debt financing for houses and automobiles would be needed, according to Yao.

To keep up appearances of 6.5 per cent growth, Yao argued debt-to-GDP would rise from 250 per cent in 2015, to around 270 per cent at the start of 2017, and onwards and upwards to an unnerving 300 per cent in two years.

This accelerated stimulus just to stay still has potentially serious consequences.

"Allocating a disproportionally large share of financial resources to state-led investment crowds out private sector investment and drags down the future return on capital," Yao wrote.

"Moreover, this arbitrary target also discourages the necessary structural adjustments that could bring near-term pain, the lack of which further bogs down the efficiency of capital allocation and future economic return."

Work by another investment bank, HSBC, found while state-owned enterprises account for around half of all debt in China's economy, they produce less than one-third of total industrial output and employ only 15 per cent of the urban workforce.

However, shedding some of the "deadweight" in the sector will cost jobs and risk the prized goal of "social stability".

The slightly better than expected fourth quarter GDP, and impression that the economy has at least steadied, gives authorities a bit more latitude to tackle spiralling debt, run away property prices and inefficient state owned enterprises.

Is a growth target even needed?

The new official growth target is expected to be trotted out at the National People's Congress in March.

The benchmark of an average GDP growth of 6.5 per cent until at least 2020 has been manufactured from China's stated aim to double GDP per capita over the decade.

While the arbitrary target remains a fundamental tenet of China's centrally planned economy to build and "a harmonious socialist society", Yao believes it will sooner or later have to be ditched.

"The harm of keeping it is all too apparent, for it has become not only an impediment to the necessary structural adjustments but also a culprit behind rapidly rising debt risk," she said.

"In any event, we will know what growth rate Chinese leadership actually thinks is necessary for social stability, when the true test of growth deceleration arrives later in 2017."