Global chief executive officers should stop praying for a miracle in China. As the investment- and export-driven boom of the last 15 years comes to an end, the days of double-digit annual growth in gross domestic product are over. Depending on the pace and nature of economic and institutional reforms, the new normal for GDP growth will be somewhere in the 6 percent to 7 percent range. For an economy of China’s size, this will still be very robust and will make China the world’s largest economy by 2025. For companies, however, a China that is growing at 6 percent to 7 percent will be very different from one that’s been growing at a 10 percent to 11 percent rate.
In China’s new era of slower growth, big infrastructure projects won’t play as important a role in the economy. Fixed-asset investment in China grew from 34 percent of GDP in 2000 to over 44 percent in 2011—an average annual growth of 12.7 percent, relative to a 10.4 percent rate of growth in GDP during this period. In 2012, however, there probably won’t be any growth, with fixed-asset investment likely to be the same as last year’s. Looking ahead, we predict not more than a mid-single-digit growth rate for this decade and beyond.