China is Embarking on A New Stage of Growth

China is entering its fifth decade of growth, and the conventional view among global investors may falsely point to growth avenues being exhausted.

China is entering its fifth decade after the first reforms of the Deng Xiaoping era, and the conventional view among global investors, even emerging markets specialists, is that the economy is mature and growth avenues are mostly exhausted. The argument is that “miraculous” growth (to borrow former US Treasury Secretary Lawrence Summers’ term), driven by a favorable demographic engine and credit- fueled investment in housing and infrastructure construction, is unsustainable and even has to be “paid back” with depressed growth levels going forward. While there are elements of truth to this perspective, it is too simplistic and can lead investors to miss important long-term opportunities. A holistic view shows that robust, higher-quality future growth may be achieved through a better balance between trade, domestic consumption, and investment.

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