The three scenarios listed in a recent Financial Times article set out the range of plausible economic outcomes available to China. The most likely is that China experiences a long, but orderly, growth deceleration as it grinds away at its debt burden, but under easily specified conditions each of the three is possible.
China is embarking on ambitious economic reforms to boost its growth prospects. What is the rationale behind these new reforms and what are the prospects for their success?
For now, for all the excited chatter, the Asia Infrastructure Investment Bank is an institution laden with symbolic value and little else.
Policies that affect the savings rate of a small country can have more-or-less predictable domestic impacts because the global economy is so large that domestic policies are not affected by external constraints. But with a large economy, the analysis changes.
While debt plays a key role in understanding the recent evolution of the Chinese economy and the timing and process of any further adjustment, there seems to be a remarkable amount of confusion as to why debt matters.
As China's economy rebalances over the coming decade, average growth of 3-4 percent is likely to be the upper limit on what Beijing can achieve.
The Chinese growth model is not radically new. It is based primarily on the growth model developed by Japan in the twentieth century, and it has been implemented in various forms by many countries.
To assess China's rebalancing in 2013, look for how quickly growth slows, how much debt grows, and the movement of inflation and trade figures. Globally, keep on eye on Target 2, Spanish bonds, and Japanese debt.
The current cycle of globalization could end in a painful period of debt adjustment and payment imbalances across the globe, with a likely slowdown of growth in China, a possible abandonment of the euro, and the risk of increasing U.S. protectionism.
Although China's growth next year is likely to remain high, expectations for China's average growth over the next decade are being revised downward.