By Laurence KnightBusiness reporter, BBC News
In case you hadn't noticed, China's economy is going through an enormous gear change.
And, given the monster that China has grown into, its planned "rebalancing" is not something the rest of us can afford to ignore.
In fact, the next few years promise to be quite rocky.
Lumbering giant
First the back story: China has been following the Asian development strategy pioneered by Japan from the 50s to the 80s, and then pursued by the "Tiger" economies of Korea, Taiwan, Hong Kong and Singapore.
Unfortunately for China, its population is almost seven times those of Japan and the Tigers combined. So its impact on the rest of the world has been far bigger, and its room for manoeuvre more limited.
The strategy involves the government - aided by a coterie of mammoth industrial giants - funnelling a huge chunk of the country's income into investment.
"Investment" here means anything which drives up the country's productive capacity - educating the population, building up manufacturing and heavy industry, and above all constructing new cities, roads, railways, power plants, ports, and so on.
The strategy also typically involves a heavy reliance on exports, which help the country raise the foreign currency it needs to import raw materials and valuable foreign technology.
Dividing up the cake
But gearing the economy towards investment and exports has a flipside - it means the economy caters far less well for the immediate needs of its own population.
In order to pull off an average 10% growth rate over the last three decades, China's government has had to tightly ration the slice of the economic cake that goes on goods and services for its own population.
As
Michael Pettis, economics professor at Beijing University, points out, Beijing's priorities can be gleaned from its policies:
- a cheap currency, which keeps exporters competitive, but makes imported consumer goods more expensive
- low interest rates, which are great for borrowers (manufacturers, state-owned industries and property developers), not so great for savers (ordinary Chinese)
- wage rises that have failed to keep up with the value of what the average Chinese worker produces, made possible by an abundant supply of cheap peasant workers migrating to the cities
- the right of local governments to expropriate farmers of their land, for profitable redevelopment
- a residence registration system that deprives migrants of welfare services in the cities where they work
All these things subsidise the state and its industrial development strategy at the expense of Chinese citizens.
Broken engines
And now comes the "rebalancing".
The above policies are all set to be reversed, so that consumer spending by the country's growing middle class can finally take over as the main engine of growth.
The leadership has been touting rebalancing for several years, but it is only with the recent enthronement of President Xi Jinping that Beijing finally seems to be getting to grips with the task.
President Xi has little choice. Exports and investment - the old engines of growth - are broken.
The 2008 financial crisis made clear that the US and Europe could no longer afford to borrow from China in order to buy Chinese-made goods.
Such is China's enormity, it has saturated its export markets.
Beijing responded to the crisis
by stepping up investment.
But that approach has also reached its limits- the credit-fuelled construction boom since 2009 threatens to lumber China with far too much housing and infrastructure for its level of development, along with a load of unrepayable debts.
Spend, spend, spend
If China must now rebalance, what does it mean for the rest of us?
