The immediate prospects for the Chinese economy are also less buoyant than is commonly appreciated.
The adverse implications of the constrained export demand on incomes and employment are obvious. But there has been inadequate attention on the dependence of recent growth on the housing bubble, financed largely by a rapidly growing shadow banking sector.
As the housing bubble in China is pricked and real estate prices fall, this will have negative multiplier effects on all related activities in construction and so on. The debt deflation associated with falling asset prices may also affect consumption and employment.
So there is a serious internal threat to growth, unless the Chinese government takes active measures to revive consumption, without relying on expansion of household debt.
Image: Residential buildings are seen in the Pudong district of Shanghai in this October 26, 2011 file photo.