“After 30 years of high-speed economic growth, potential productivity in China has dropped.” So said a senior Chinese official, speaking this week. If true, his statement marks the end of a period that has transformed both China and the global economy.
Of course, this is slow growth with Chinese characteristics. The country is still projected to grow by 7.5 per cent this year – far faster than any of the other of the world’s five largest economies. Since China is now the world’s second-largest economy, growth at this pace still implies an enormous addition of both capacity and demand. Talk of a slump in global demand for commodities or luxury goods or cars is premature.
In fact, an era of relatively slower growth in China is welcome news – both for the country and the global economy. The government’s previous insistence that it must achieve growth of at least 8 per cent a year betrayed a neurotic insecurity about social unrest. It has also involved increasingly unacceptable environmental and social costs – as anybody breathing the choking Beijing air can testify. President Xi Jinping’s statement last week that “China’s model of development is not sustainable” was a sign of political maturity.