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China has in the past decade been a global economic darling, at times posting double-digit growth rates and pushing ahead with massive investment projects at the height of the financial crisis.
But in recent months, policy makers in the world's second-largest economy say economic growth will pullback, prompting them to lower the country's 2012 GDP growth forecast to 7.5 percent -- its lowest level in eight years.
Michael Pettis, professor of finance at Peking University and author of the widely-followed blog China Financial Markets, says even that number is optimistic. He expects the Chinese economy to grow just above 3 percent for the remainder of the decade.
"A much lower growth rate is not necessarily bad for China or for the rest of the world, it's a necessary part of China's rebalancing towards a very different kind of economy," he says. He says even policymakers within China are lowering their GDP forecasts, some to as low as 5 percent.
Pettis' says the lower growth rates reflect the transition that the Chinese economy will have to make -- from one based on investment and exports to one based on consumption.
"For the last 30 years the investment levels have been extremely high and one of the reasons China has grown very quickly has been these implicit transfers from the household sector to subsidize rapid growth," he says. "But one of the consequences has been both over investment and a very low consumption share of GDP."
He says such a change will be felt in countries such as Canada and Australia, which have benefited from the China's construction and investment boom that helped push up the price of commodities.
"When you think about an economy of China, which is about 10 percent of [the] global economy -- maybe less if you eliminate some of the bad investment -- consuming more than 50 percent of global iron ore, 50 percent of global cement and about a third of global copper…it doesn't make sense," he says. "It's not possible for an economy of that size to have such a disproportionate impact on demand."
He says that even if "optimistic" annual growth rates of 7 percent take place over the next decade, the rate of investment will still have to slow, and that will impact the demand for commodities "pretty significantly."
"That does have dire implications for non-food commodity exporters," he says.
China -- currently the biggest consumer of copper -- over the past decade helped to fuel a jump in copper prices, from $2,000 US a tonne in 2003 to as high as $10,000 a tonne in 2011.
Pettis is not alone in his call for a rebalancing of the Chinese economy. Martin Wolf, associate editor and chief economics commentator for the Financial Times, recently told BNN that he believes growth rates in China could be hurt by such a transition.
"Investment is still about 50 percent of GDP and that has to fall," he told BNN. "The question is 'Can consumption grow quickly enough to offset the inevitable weakening of the growth in investment?'"
He says that while that transition occurs, China could suffer from "a few years of quite significantly reduced growth."