Peter Orszag has a good column on why sluggish growth in China is arguably more of a threat to U.S. interests than robust Chinese growth, a subject we’ve addressed on a few occasions. There is, however, one interesting near-term subtlety, according to Michael Pettis, a professor of finance and economics at Peking University and author of the forthcoming The Great Rebalancing:
The speed with which China’s GDP growth slows in 2013 will tell us a lot about how determined Beijing is to rebalance the economy in such a way that growth is driven more by higher household income and consumption and less by investment funded by rising government and government-related debt. It will also tell us how successful Beijing’s new leadership will be in consolidating power and forcing the kinds of economic and financial reforms on which most economists now agree, but which are likely to be politically difficult.
That is, if growth falls to 6 percent in the second half of 2013, it is a sign that “Beijing has really gotten its arms around the rebalancing problem and is serious about adjusting quickly.” But if it is substantially higher, it is a sign that Beijing is not changing course, which will mean a hard landing in the future.