Two-speed growth in China – actual and theoretical

by Chris Zappone

There seem to be two speeds of economic growth in China. The amped-up, investment-led, binge-fuelled, actual speed which has driven the country’s expansion in past decades and the slower, more balanced, sustainable, theoretical growth that everyone talks about as a necessity in China’s economic maturation. This piece in Quartz says the difference is visible a growth target as close as 7.5 per cent to 7 per cent.

A 7.5% screams “borrow, build and do whatever else you can to boost growth.” The lower one says to emphasize that much-discussed structural reform. It looks like 7.5% is the magic number for 2014.

The Quartz piece notes that “it signals that China’s leaders are putting those structural reforms on the back burner, even though many think they’re urgently needed for the country to avoid a financial crisis.”

No doubt there are innumerable internal considerations in China when it comes to prioritizing how to grow and reform the economy. But the contradiction between the aspirations for the economy and the daily necessities of life in China are real. That broad contradiction mirrors the paradox of external issues as well. On the one hand, it’s all about a “peaceful rise” and a “win-win” relationship with the world – on the other hand, it’s more of a coercive, China-first policy in borders, trade, diplomacy, etc.

The fundamental reality can’t be binary. At the same time, even with an unbalanced economy, China will muddle through.