Moderating Growth and Structural Change in the People’s Republic of China: Implications for Developing Asia and Beyond

A gradual moderation in growth is currently underway in the People’s Republic of China (PRC). This is the result of a combination of factors, including a shrinking working-age population, the natural process of convergence and rising labor costs, and a structural shift toward consumption-led growth partly encouraged by government. The decline in PRC growth is expected to reduce gross domestic product (GDP) growth in the rest of developing Asia by about a third of a percentage point per year over the next 2 years. It will also reduce Japan’s GDP growth by a fifth of a percentage point. These reflect the PRC’s strong intraregional trade and production linkages. PRC’s growth moderation and structural transformation present both challenges and opportunities. The effect on individual Asian economies depends on how much they sell to the PRC, how much they sell through the PRC, and how much they compete with the PRC.