EP82: China is slowing but not collapsing

China’s recent slowdown has unsettled global markets, especially commodities, but fears of an economic collapse are overstated. The sharp equity sell-off reflects an overdue correction in an inflated market that is largely disconnected from the real economy, with limited household exposure and manageable systemic risk. RMB depreciation is driven by fundamentals and reform goals, particularly advancing reserve-currency status, and is likely to remain controlled within about 10%.China’s growth is clearly decelerating, potentially to around 5%, well below official targets but still strong by global standards. This slowdown reflects a difficult yet necessary transition from export- and investment-led growth toward consumption and services, which now account for roughly half of GDP and continue to grow robustly.The key uncertainty lies in Beijing’s political response. The Communist Party must balance reform with social stability, especially as state-owned enterprise reform risks unemployment and unrest. Despite volatility, China’s challenges represent maturation, not collapse, and its long-term rebalancing still holds promise.