China’s economic growth is slowing due to weak exports and a burst real estate bubble. Unless painful structural reforms are implemented, this slowdown is likely to persist over the long term.
Structural problems will be difficult to resolve in the foreseeable future. China is likely to avoid the necessary corporate bankruptcies for cleaning up balance sheets and supply-side consolidation by forcing banks to conduct unprofitable businesses. This move will suppress economic development.
Fiscal or monetary incentives cannot restore growth. Funds used for economic stimulus will flow into excessive, inefficient, and inflationary government fixed investment projects.
In 2011, China's per capita income was $5,000. This is less than half of the global average and one-tenth of the income level of OECD countries. China has the potential to maintain a relatively high growth rate until per capita income reaches $15,000. However, it seems that few people are willing to embrace the painful reforms needed to fully realize China's potential.