This is something really interesting to note. China is self curtailing high growth as a measure for sustainability in the long run. With inflation at 5% and food inflation at 10%, there is no point in high growth if the per capita income is lower than what is necessary. Looks like they will stop blind investment in infrastructure. Perhaps take a leaf out of Indian books and build only after creating the market for it. It's slower but has higher returns.
Indian CPI for durables is only marginally higher while for electronics and other stuff, it is a bit more. But I don't see why they are a major problem for us. Afterall the tax earnings on higher CPI is obviously good for GDP.
Consumer products are mostly made in China and also Chinese food supply is greater compared to India's. So, CPI obviously lower than India. Subsidies provided by CCP is also higher in China compared to Indian govt subsidies.
These are parameters that will improve over time. Our per capita income is set to double every 9 years, which is quite significant. So, managing adequate supply for greater demand is a headache that we will have to manage as does everybody else in the world. It has become an issue for your country as well and that's why we see China curbing growth to reduce effects of inflation on GDP. India has always had a higher inflation rate compared to China in the recent past.
Our economy is not as dominated by the industry as yours is. Also, we are going to have to increase food production over the next decade which is very crucial. Both these sectors have to have a greater share in the GDP if we are going to have to compete with China in the long run. Both sectors are the best way for us to reduce our fiscal and current account deficits. Industry and food also increases trade which further helps reduce deficit.
So finally China has come into its senses on its mindless growth with almost no returns on the investment and has to fall back on Indian growth rate kind of scenario. It needs to be seen how they will tackle the unemployment/joblessness due to lowering of growth rate targets.
It’s better to have a slower, steady but healthy growth than a fast, dramatic but costly leap. The environment in China today is unrecognizable compare to 20 years ago. Millions of people died every year of cancer, food poison and other diseases directly or indirectly related to pollution.
We just can’t develop in such way and no longer could afford such damages which would take generations to repay. I would say it’s a wise decision.
GDP growth or should I say govt spending is going to come down by some points. I doubt your policy makers are waiting for $10k USD per capita to take such risks. Your inflation rate at 5% is going in the same direction as India's. Maybe it does not make a difference to you, your earning will be greater than $10K USD/year, but the average folk is going to be haunted by the increase in prices.
The day China crosses $10K in per capita then your economy has already surpassed US in terms of GDP. Are you really willing to allow inflation to spiral up until then?