It says something about investors' faith in China as the global economic saviour that world markets are in retreat after Beijing cut the country's growth target to an eight-year low. That was not what they wanted to hear amid debt woes in Europe and mixed signals of recovery in the US, which surely have prompted China to lower expectations of its export-led economy. But such sentiment reflects a short-term view. The lower target comes with a pledge to boost domestic consumption, a reform long sought by economic partners and economists concerned about economic imbalances. Stronger consumption in such a huge market can only benefit the global economy.

Premier Wen Jiabao told the annual session of the National People's Congress that this year's growth target had been cut to 7.5 per cent in a bid to refocus the economy away from an unsustainable growth model. The government's first priority this year would be to boost consumer demand through reducing the income gap, and reduce reliance on external demand and capital investment. What is good for China in the long term will also be good for the world economy. Double-digit growth over 30 years may have made China the world's second-largest economy, but its people have paid a heavy social and environmental price. As the economic base has grown, it has become impossible for China to sustain it. A slowdown has put increasing pressure on job creation and social stability.

A reduced growth target that is sustainable is therefore not a bad thing. To maintain its rise, China needs to undertake drastic political and economic reforms. When the economy was booming, no one had any appetite for reform. A slowdown that results in overcapacity in resource-hungry, high-polluting industries, such as steel and cement, is a good opportunity for the government to force rationalisation.