China is facing a slowdown in economic growth potential due to at least three unavoidable structural issues: demographics, environmental costs, and changing consumer preferences. Ongoing technological innovations and reforms can partially cushion the deceleration, but a further slowdown in growth is inevitable in the coming decade. This trend, together with the financial risks caused by a high macroeconomic leverage ratio, calls for a new macroeconomic policy framework. Key to sustainable, high-quality, and environment-friendly growth in China is adoption of a macroeconomic policy framework that is less growth-centric and focuses more on macroeconomic and financial stability.
Full Text (PDF): A New Macroeconomic Policy Framework for Prudence and Higher-Quality Growth in China