Slower growth paves way for economic reform

Fact and forecast have combined to deliver a double blow to the world's economic prospects. First the mainland's statisticians reported that the country's economy - the driver of global growth since the 2008 financial crisis - slowed to 7.4 per cent last year, the weakest expansion in 24 years. Then International Monetary Fund economists, in their latest update of the global outlook, cut forecasts for China's GDP growth this year and next to 6.8 per cent and 6.3 per cent, respectively. Despite a sharp drop in oil prices, the IMF also lowered its global growth forecasts for this year and next by 0.3 percentage points - to 3.5 per cent and 3.7 per cent, respectively.

Those world forecasts depend on the US sustaining the momentum of recovery. They put pressure on the weak pillars of recovery, Europe, a union divided on itself, and Japan, which baulks at economic reform, to put their houses in order.

But they also add to the urgency of restructuring the mainland economy to reduce the temptation of wasteful stimulus measures and investment to sustain growth. The world still looks to China's still developing economy for a key contribution to growth. As a result, Premier Li Keqiang can be assured of the full attention of nearly 2,000 government and business leaders when he addresses the World Economic Forum in Davos, Switzerland, today. He is expected to warn them of more downward pressure on the mainland economy, lending weight to the IMF forecasts.

China's growth last year undershot the official full-year target of 7.5 per cent, but officials had already said they could live with such an outcome. President Xi Jinping has referred to the new economic trajectory as the "new normal", as Beijing tries to skew the economy away from reliance on heavy industry and exports towards domestic consumption. But it has encountered a range of interim problems, including a property slump and fluctuating exports, which have prompted targeted stimulus and adjustments.

For the sake of stability, it must maintain this balance. However, the upside of a slowdown is that it makes the promised benefits of restructuring easier to sell than during boom times. Beijing must take advantage by pushing ahead with consolidation and restructuring to put the economy on a sustainable growth path. Chinese leaders have been making the right noises about this. Hopefully, we will now see more of the promised measures.