AFTER three decades of double-digit rates of high growth, China's economy is set to decelerate. Growth last year came down to only 7.8 per cent, the lowest in more than a decade.
This downtrend was carried forward into this year as China saw its growth in the second quarter slide to 7.5 per cent, the lowest point since the 2008 global financial crisis.
With domestic conditions still unfavourable and external conditions for growth not much improved either, China's economy runs the risk of a hard landing. Its present economic slowdown already has serious ramifications for many regional economies.
All eyes are on China's new Premier, Mr Li Keqiang. Under the country's existing political and administrative structure, the State Council, which Mr Li presides over, is supposed to be a kind of "economic Cabinet", taking charge of day-to-day economic affairs while President Xi Jinping deals with the even more important political and ideological matters and foreign policy that affect the nation as a whole.
Thus, observers and scholars are closely watching how Mr Li himself takes to China's rapid economic deceleration and what kind of policy remedies he will bring about to arrest further economic slowdown.
Going for a smooth transit
THE leadership has already accepted the inevitability of China's lower growth. It also realises that maintaining China's past double- digit hyper growth is just economically, socially and environmentally unsustainable.
But the government wants a smooth transition to the lower growth regime, with reasonably strong growth of 7 to 8 per cent a year through this decade, so that China can avoid the so-called "middle-income trap" in order to finally become a developed economy by 2030.
However, by the middle of this year, China's economic deceleration seemed to have continued unabated, evidenced by the poor performance of several key indicators, for example, export growth in June was negative (-3.1 per cent) and the purchasing managers index (PMI) for manufacturing production had further declined to 50.1. June's credit crunch had also hurt the overall sentiment.
Signs of the weakening employment outlook might have been the last straw. China has not yet faced unemployment problems; but hiring intentions have plummeted because of slower manufacturing activities.
China's universities are churning out seven million graduates this year, and many will face unemployment (frictional unemployment) due to job mismatching. Slowing economic growth will certainly worsen employment prospects for these new entrants to the labour force.