Contrary to the mainstream view that China will keep growing at fairly rapid rates, we expect GDP growth there to slow to 2% by 2030. This slowdown need not in itself be bad for the rest of the world, especially if slower growth continues to be accompanied by a declining current account surplus. Even if the surplus rebounds a bit, the impact on the rest of the world should be manageable. That said, given China’s high debt level, there is a risk that its adjustment to slower growth is not a smooth one. Moreover, some countries will find it very challenging to adapt to China’s shift away from investment-led growth.
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