By William Pesek

If ever China needed to serve up a decent GDP report, it was this one. With stocks booming, global growth uncertain, India catching up and Beijing’s Asian Infrastructure Investment Bank coming online, now isn’t the time to betray weakness. So, like any good command government, China reported gross domestic product grew 7 percent in the first quarter, exactly as expected.

The number is a mirage. Other data show China limped out of the first quarter: Industrial output slumped to 5.6 percent and retail sales climbed just 10.2 percent in March. Fixed investment growth slowed to 13.5 percent in the first quarter, while property sales fell 9.3 percent between January and March. Meanwhile, the money supply is contracting. There’s no doubt the People’s Bank of China must act assertively to avoid a much-feared hard landing. The real question is whether additional stimulus will work this time.

Much of the exuberance pushing mainland and Hong Kong stocks into the stratosphere recently has been based on faith that PBOC governor Zhou Xiaochuan is about to loosen monetary conditions on the mainland. If Zhou doesn’t slash his 5.35 percent lending rate soon, China could see equities collapse along with property. But there are at least three reasons to wonder how much impact additional rate cuts are likely to have.

First, banks and companies may be borrowed out. In the first three months of 2015, capital expenditures by companies eased for a fourth straight quarter, according to the latest survey of more than 2,000 firms by New York-based China Beige Book International (the figure has now reached its lowest level in at least four years). In an interview with Bloomberg Television and a Wall Street Journal op-ed, President Leland Miller attributes the chill to over-borrowing, overcapacity and a growing fear that China’s debt reckoning is approaching.

“Our credit data suggests that most firms are no longer willing or able to borrow,” Miller writes in the Journal. “Some hear the stories of imminent defaults and want to start paying off heavy debts, or at least not incur new ones. And those firms that do want to borrow face a highly segmented credit market.” The irony, he explains, is that “banks are charging less for credit but not lending more, instead confining themselves to less-risky customers. Other firms have to pay through the nose from shadow lenders or go without.”

Second, developers are tapped out. When GDP slows, Beijing’s first impulse is boost the real estate sector. As research from GaveKal Dragonomics shows, though, a structural slowdown in housing is gaining momentum regardless of what policy makers do.

“This new trend of consolidation in real estate will be bad news for local governments looking to raise funds by selling land,” write analysts Thomas Gatley and Rosealea Yao. What’s more, they find, “the money that developers spend on acquiring existing assets is not going into buying rights for future projects.” In other words, the property-related multiplier effect Beijing has long relied on may not work in 2015.

There are few alternatives. The fast-growing number of ghost cities means additional fiscal spending will get little traction. Also, recent data offer little hope that household consumption will surge, even if President Xi Jinping continues to rebalance China’s economy away from investment and exports. The only viable growth engine is the PBOC. Odds are, though, the money the central bank churns into the economy will just feed the stock bubble.

Finally, there’s a rising danger of capital outflows. Washington tends to hyperventilate over China’s weak currency. These days, Beijing faces the opposite problem. In the first quarter, yuan positions on the PBOC’s balance sheet, a barometer of capital flows, fell a record $41 billion. Given the exodus of mainland money to Hong Kong stocks, it’s safe to assume outflows are accelerating rapidly. Indeed, recent moves by the PBOC to intervene in markets to support the yuan suggest strains are rising. China’s foreign-exchange reserves slid the most on record in the first quarter.

While a boon for export industries, a weaker yuan is further adding to default risks. Last week, Cloud Live Technology Group became the second company to default in China’s onshore bond market. But the more immediate worry is dollar bonds. That explains the level of angst over Shenzhen-based Kaisa, which may soon renege on its U.S. currency notes. While the Bank for International Settlements puts China’s cross-border loans at about $1.1 trillion, no one really knows the true number. A bit like China’s true GDP rate.

• William Pesek writes for Bloomberg View.