Last month, in his annual report to China’s legislature, Premier Li Keqiang set the target for 2015 growth at just 7%—the slowest rate in 25 years. But Mr. Li wasn’t finished: He also told the world that slower Chinese growth would be a “new normal.” Predictably, many observers of the Chinese economy overreacted.
One group argues that China’s leaders simply cannot tolerate such a slowdown. Inevitably, they predict, Beijing will return to its old tool kit, pumping out billions of stimulus in a futile effort to reinflate growth.
A second group argues that China’s economy is falling off a cliff. By recent standards, these skeptics maintain, 7% growth is disturbingly slow. That, in turn, suggests China’s economy must be in truly desperate straits.
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