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China is one of the most well-known growth stories in the world.But earlier this week, Chinese policymakers announced their intention to slow growth to a target rate of 7.5 per cent. And not everyone fully understands why any country would want to slow things down.
In a new op-ed for the Financial Times, economist Jim O’Neill lists four reasons why:
A number of factors explain this plan. First, it has been clear since 2008 that the days of massive Chinese export growth to the west were over. Second, this can’t be replaced by generous government investment spending. Third, rapid GDP growth has become self-defeating, placing considerable strains on China’s resources and environment, forcing up commodity prices, bringing inflationary pressures and rising wealth inequality. Too fast GDP growth had outlived its purpose. Fourth, inflation is threatening social stability as low income urban citizens see their real wealth eroded. All of this meant lower economic growth has become not only necessary but desirable.