s China fitfully tries to rebalance its economy, a small but rising number of Chinese economists are beginning to predict sharply lower annual growth rates of 6% to 7% over the next few years. But the arithmetic of adjustment suggests growth is likely to be even lower, perhaps half that level.
China’s growth over the past couple of decades was based on large increases in government-directed investment. As a consequence, it had to run large trade surpluses to absorb the resulting excess capacity in manufacturing.
This can’t continue. Investment, especially in infrastructure and real estate, is increasingly wasteful.