Let me be clear here: there is a cyclical dimension to the China story, and it is important that we remember that. But there is also a structural dimension. And the associated change in relative prices constitutes a force for significant structural change in the economy. I think we have all only begun to grasp its implications relatively recently.
These various factors can explain why the correction on the markets was so violent. The Chinese government revised its growth forecast downwards compared with previous years to what is now 7%. 1 This is much lower than the larger growth rates of past years.