Embracing China's "New Normal"

Why the Economy Is Still 
on Track

A construction site in Beijing, November 2013. Reuters / Kim Kyung-Hoon

It is clear by now that China’s economy is set to slow in the years to come, although economists disagree about how much and for how long. Last year, the country’s GDP growth rate fell to 7.4 percent, the lowest in almost a quarter century, and many expect that figure to drop further in 2015. Plenty of countries struggle to grow at even this pace, but most don’t have to create hundreds of millions of jobs over the next decade, as China will. So understandably, some experts are skeptical about the country’s prospects. They argue that its production-fueled growth model is no longer tenable and warn, as the economist Paul Krugman did in 2013, that the country is “about to hit its Great Wall.” According to this view, the question is not whether the Chinese economy will crash but when.

Such thinking is misguided. China is not nearing the

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