A man walks past an advertising billboard of a commercial property development in Beijing, China, December 31, 2016. Photo: REUTERS/Thomas Peter

China’s economy grew by 6.8% in the fourth quarter, boosted by higher government spending and record bank lending.

Beijing’s decision to double down on spending to meet its official growth target may have come at a high price, however, as policymakers will have their hands full trying to defuse the legacy of explosive debt growth.

The world’s second-largest economy also faces increased uncertainties from a cooling housing market and the government’s bid to push through painful structural reforms, which could help deal with the root-cause of rising debt and housing problems but weigh on near-term growth.

The economy expanded 6.7% for the full year, the National Bureau of Statistics said on Friday, roughly in the middle of the government’s 6.5% to 7% target but still the slowest pace in 26 years.

Economists polled by Reuters had expected 6.7% growth for both the fourth quarter and the full year.

While China is on more solid economic footing than this time last year, it faces increasing uncertainties in 2017, with a housing frenzy showing signs of cooling and the impact of previous stimulus measures expected to fade.

China’s sluggish exports also could come under fresh pressure if Donald Trump follows through on pledges to impose tough protectionist measures.

“While Chinese growth looks stable into early 2017, a more marked slowdown by the second quarter appears inevitable,” Gene Frieda, global emerging markets strategist at asset management giant Pimco, said in a note this week.

“Growth has been stabilized only after massive fiscal and credit stimulus. China’s total government and private sector debt will likely surpass 285% of GDP this year, a 90% increase since 2008.”

The government could tighten credit conditions slightly this year to encourage debt-laden companies to deleverage, but it’s unlikely to rush to raise interest rates despite a pick-up in inflation, policy insiders said.