The world's investors sift through the semantics of China's economic policy pronouncements with increasingly desperate optimism. As the euro-zone crisis twists and turns, they seek signs of history repeating; a rerun of the 4 trillion yuan stimulus of 2008 (HK$4.54 trillion at the time) that maintained impressive Chinese growth as the West slipped into recession - and shielded the global economy from worse ills.
China is well versed in economic miracles, but a government decision to roll out an investment programme on the same scale as four years ago would be financial suicide. It is time, then, to face up to the uncomfortable reality: the Chinese economy is slowing abruptly and is likely to continue to do so.
Analysts have rushed to predict the nature of the landing. Hard, soft, bumpy even. But there is little value in labelling the situation with loose terminology given the vast differences of opinion over the definition of a 'hard landing'.
Economists tend to define a hard landing in terms of declining gross domestic product growth figures and place it anywhere between growth of 4 per cent and 7 per cent. Perhaps a more simple measure based on the principles of econometrics will suffice.
A soft landing indicates a short-term fall in growth, a fluctuation rather than a trend. A hard landing is reflective of a structural break, an intense downward adjustment that will prevent the Chinese economy from returning to current growth levels for at least the next three years, perhaps ever. Of the two scenarios, the most compelling evidence points to the latter.
That Premier Wen Jiabao has set a growth target of 7.5 per cent for this year is highly significant. It marks the first time in a decade that China has aimed for growth of less than 8 per cent. This figure demonstrates realism and appears conducive to setting China on a more sustainable path of development, both in terms of raising the living standards of Chinese people and environmental protection.
But there is little evidence to suggest that the decline in growth is a result of progress in rebalancing the economy, away from a low-cost manufacturing, export-driven model to an innovation-led economy powered by domestic consumption.
There have been plenty of weighty exhortations over the past decade from the central authorities on the need for industrial restructuring, but concrete action has been limited. Imitation, not creation, is still the order of the day in the majority of mainland factories.
Yet China's export competitiveness is shrinking. Rising wages, an ageing workforce and higher commodity prices have all taken their toll. This is not to say all Western companies will up sticks, at great expense, in search of another Asian exporter. Ultimately, higher costs will be passed on to consumers. To take up the slack of a weakening export sector, an increase in technological innovation within the private sector and a surge in domestic consumption are required. But this requires long-term strategic planning and in recent weeks Beijing has panicked into searching for ways to revive growth in the short term through yet more investment.
The cracks in the fabric of the Chinese economy are gaping. In recent years, investment recorded an annual increase of 25 per cent to achieve 10 per cent economic growth. Ordinary people's livelihoods have suffered as a consequence; 50 per cent of GDP has been used for further industrial investment rather than developing a more comprehensive social security system. Chinese society is more divided than it has ever been and tensions between workers and employers, the people and the government can only rise.
China's low employment elasticity - a significant drop in GDP will trigger a sharp fall in employment - represents another serious structural flaw. About 60 per cent of the urban workforce is comprised of rural migrants occupying low-skilled jobs. Teaching them new skills will be a huge challenge, out of reach for the foreseeable future. In addition, there are 7 million university graduates seeking employment each year, not to mention the non-college-educated urban youth.
The fiscal stimulus in 2008 spawned a swathe of wasteful, highly polluting infrastructure projects often with no long-term return. A repeat is not feasible. The government does have some tools at its disposal. As long as inflation remains under control, it can reduce the bank reserve deposit ratio and cut interest rates, a decision it took recently. The long-term benefits, however, will be minimal.
Chinese policymakers must fulfil their promises to boost the growth and competitiveness of the private sector by increasing lending and offering tax incentives. The monopolistic environment in which state-owned enterprises operate is in urgent need of radical reform. During the boom times, SOEs enjoy abnormal profits, negating the need to innovate; in the hard times, they are bailed out by central government funds, thus perpetuating the cycle.
China's sword of Damocles has long been the housing market - and the bubble that encompasses it. The government introduced a raft of policies to curb house price inflation, which seems to have worked in the major cities.
Falling house prices are welcomed by the general public, but have raised concerns that the bubble may burst. Many property developers have experienced a credit crunch. A collapse of the housing market would lead to an accumulation of banks' non-performing loans and cash-strapped local governments would see revenues, obtained through often legally dubious land sales, plummet.
The Organisation for Economic Co-operation and Development forecast Chinese growth at 8.2 per cent this year before rebounding to 9.3 per cent in 2013. But with the euro-zone crisis threatening to incapacitate China's largest trade partner, this prediction appears wayward. A gradual decline to 6.5 per cent is more realistic. Eternal double-digit growth was, of course, never a possibility. The Chinese people must get ready for three years of hardship. In return, the Western world, which has become dangerously reliant on China to prop up the global economy, must adjust its expectations.
Shujie Yao, professor of economics and Chinese sustainable development, is head of the School of Contemporary Chinese Studies at the University of Nottingham