Excluding China, there was a general slowdown in growth of service imports by developing countries, mirroring a lower growth rate in their exports.

But even with a soft landing , developing countries will be affected by a slowdown in economic activity in the United States and China.

A further slowdown in China is a distinct possibility. China s leaders must do what it takes to ensure that such a slowdown is not viewed as secular trend a perception that could undermine the consumption and investment that the economy so badly needs.

There is certainly reason for concern beginning in China. After decades of nearly double digit growth, China appears to be experiencing a marked slowdown one that some argue is actually worse than official statistics indicate.

Economically, the BRICS are facing serious challenges. In addition to a well documented growth slowdown, China has lately experienced considerable stock market turmoil and currency devaluation.

This raises an important tactical challenge for China. How can it stay the reform course without being derailed by a significant growth slowdown in the short term?

Containing China s Slowdown

Long Live China s Slowdown

In certain cases, the process of slowdown becomes one of delay.

The past three months, however, have seen a significant slowdown in China s exports, domestic investment, industrial output, and tax revenues. A major slowdown seems to be looming.

In other words, a China centric Asian supply chain has made a big bet on the grand European experiment a bet that now appears to be backfiring. Indeed, in China, a now familiar pattern is playing out yet again another slowdown in domestic growth stemming from a crisis in the advanced economies of the West.

China successfully navigated the crisis, avoiding a significant slowdown, by ramping up public spending. But, as a result, it now has no further scope for increasing public consumption or investment.

MANILA As the slowdown in the world s major industrial economies drags on, growth in developing Asia is being affected. A serious burden will likely be placed on the region s major economies, particularly its two giants, India and China.

Import demand within the developing economies is unlikely to compensate fully for the slowdown in the developed economies, but China will continue to be an important determinant of trade performance for most parts of the region.

In other words, a China centric Asian supply chain has made a big bet on the grand European experiment 160 a bet that now appears to be backfiring. Indeed, in China, a now familiar pattern is playing out yet again another slowdown in domestic growth stemming from a crisis in the advanced economies of the West.

As they prepare for the coming Chinese slowdown and seek to minimize the risk of regional destabilization, Asian economies must strengthen domestic demand and reduce excessive reliance on exports to China. In other words, sustainable growth requires all of Asia s China dependent economies to rebalance their two main growth engines.

Confronted with another global slowdown that could depress its export markets for years, China needs to boost consumption even as it cools investment. And it needs to so in ways that do not rely on excessive credit expansion.

This gives China and its policymakers considerable room for maneuver in coping with the current growth slowdown. Unlike most Western observers, who are fixated on the slightest deviation from the official growth target, Chinese officials are actually far more open minded.

The outcome of premature fiscal consolidation is all but foretold growth will slow, tax revenues will diminish, and the reduction in deficits will be disappointing. And, in our globally integrated world, the slowdown in Europe will exacerbate the slowdown in the US, and vice versa.

Not surprisingly, China skeptics are putting a different spin on the latest growth numbers. Fears of a shadow bank induced credit bubble now top the worry list, reinforcing longstanding concerns that China may succumb to the dreaded middle income trap a sustained growth slowdown that has ensnared most high growth emerging economies at the juncture that China has now reached.

Moreover, donor countries had reduced their official development assistance owing to a slowdown in their economic growth.

China? But where in China, miss?

China acknowledges that high levels of air and water pollution create discomfort and harm the public s health. Government spending on remedying environmental damage could absorb substantial funds if demand side weakness exacerbates the expected supply side slowdown.

Because of the greater presence of Asian economies in the world, that would also mean a slowdown in world growth.

Though the US is finally emerging from an extended period in which potential output exceeded demand, high unemployment continues to suppress demand in Europe. One of the main casualties is the tradable sector in China, where domestic demand remains inadequate to cover the shortfall and prevent a slowdown in GDP growth.

China has been focused on these objectives for five years seeking to transform a powerful yet unbalanced growth model based largely on exports and investment into one driven increasingly by its consumers. Success is essential if China is to avoid the dreaded middle income trap the economic slowdown that most fast growing developing economies experience when they reach income thresholds comparable to that of China today.

World output cruising at 3 per cent growth in 1998 despite emerging market slowdown ... , press release issued in English in December 1997

And back in China, what do they say in China?

BEIJING The market is always in search of a story, and investors, it seems, think they have found a new one this year in China. The country s growth slowdown and mounting financial risks have spurred a growing wave of pessimism, with economists worldwide warning of an impending crash.

Virtually every Chinese official referred to this slowdown as their country s new normal. They all seemed reconciled to slower growth, which was initially surprising, because officials previously argued that China needed rapid growth to maintain employment and avoid political unrest.

Once increasing fixed investment becomes impossible most likely after 2013 China is poised for a sharp slowdown. Instead of focusing on securing a soft landing today, Chinese policymakers should be worrying about the brick wall that economic growth may hit in the second half of the quinquennium.

The outlook for 2005 is for a slowdown in economic growth as commodity prices decline but for a slight increase in inflation.

HONG KONG During three decades of favorable global economic conditions, China created an integrated global production system unprecedented in scale and complexity. But now its policymakers must deal with the triple challenges of the unfolding European debt crisis, slow recovery in the United States, and a secular growth slowdown in China s economy.

With services in China employing 30 more workers per unit of output than manufacturing and construction, the sector s expansion will help to preserve social stability, even as economic growth slows to 7 . Observers in the West, focused largely on the slowdown of headline GDP growth, continue to miss this key point.

Devastated four years ago by the Great East Japan Earthquake and tsunami, Japan's automobile production was cut by nearly half. The financial damage did not stop at the country's borders as a direct result of the slowdown in Japan, automobile production dropped by some 20 in Thailand, 50 in China, and 70 in India.

In Tanzania, growth this year should be around 7 . At a time when the major emerging economies with the exception of China are facing a sharp slowdown, Africa, with its untapped energy resources and precious raw materials, including rare earth minerals, has naturally become a focus of investors attention.

Africa's growth slowdown was already apparent in the late 1970s, but the debt crisis of the early 1980s marked a watershed.

Merkel in China

Tianjin in China.

It used to be said that when America sneezed, the rest of the world caught a cold. More recently, many claimed that with the rise of China and the petro states, an American slowdown could be decoupled from the rest of the world.

This scenario is not inevitable, and it certainly will not be on the minds of Xi and Russian President Vladimir Putin when they meet in Moscow. China is in the throes of an identity crisis as it faces an almost inevitable economic slowdown and the need to implement a new growth model.

Third, the renminbi s international and reserve currency prospects will be shaped by how China handles its growth slowdown. The key will be whether it manages a smooth deceleration, in which case renminbi internationalization will proceed, or suffers a hard landing, in which case social unrest will intensify and all bets are off.

In Berlin, meanwhile, German Chancellor Angela Merkel s leadership is coming under growing pressure. Her decision to keep Greece in the eurozone, her courageous but unpopular choice to allow in a million refugees, the Volkswagen scandal, and flagging economic growth (owing to the slowdown of China and emerging markets) have exposed her to criticism even from her own party.

It overestimates the effectiveness of anti corruption campaigns in contemporary China (there have been many in the last three decades), and it overlooks the political sources of the country s economic slowdown. While Xi s efforts to cleanse the rot inside the Chinese party state should be applauded, it is no less important to recognize their limits.

A Dissident in China