For the past decade, analysts have been able to describe economic conditions in China with some accuracy but have failed generally to understand the underlying growth dynamics. We’ve done a great job, in other words, of describing the landscape through which the train is passing, but because we don’t understand where the train is headed we are constantly shocked when the landscape changes.

It should have been clear for many years that China’s investment-driven growth model was leading to unsustainable increases in debt. As recently as two years ago, most analysts were ecstatically – and mistakenly – praising the country’s incredibly strong balance sheet. But when Victor Shih's analysis of local government borrowing came out last year, the mood began to change. Now the market has become obsessed with municipal debt levels.

But dangerously high levels of municipal debt are only a manifestation of the underlying problem, not the problem itself. Even if the financial authorities intervene, unless they can change the economy’s underlying dependence on accelerating investment, it won’t matter. They will simply force the debt problem elsewhere.

In all previous cases of countries following similar growth models, the dangerous combination of repressed pricing signals, distorted investment incentives, and excessive reliance on accelerating investment to generate growth has always pushed growth past the point where it is sustainable, leading to capital misallocation and waste.

China’s problem now is that the authorities can continue getting rapid growth only at the expense of ever riskier increases in debt. Eventually, they will choose to curtail investment sharply, or the excessive debt will force them to do so. When that day arrives, they can expect many years of growth well below even the most pessimistic current forecasts.

But not yet. High investment-driven growth is likely to continue for at least another two years.