The Future: Real Transition or Destructive Bubble

The Chinese economy is now at a transition point. The old model based on high levels of investment in infrastructure and on fast growing export markets has now passed its culminating point. Further investment is less needed. Both political and economic factors will limit the growth rate of exports. Although the transition will be difficult, China has the option to move to a new growth model based on high tech factories and on rural entrepreneurship. It would be a mistake to try to use fiscal or monetary stimulus to delay the needed move to the new growth model.