Issue China's debt-financed growth model runs into limits that only consumption can relieve

Summary

MGI argues that higher domestic demand could open a productivity-acceleration pathway for China. The country has real supply-side strengths, but government and corporate spending financed by debt cannot continue indefinitely. There is also a ceiling on how much net exports can add to growth, partly because trading partners can absorb only so much of China's exports. For these reasons, the report sees a pivot toward domestic consumption as possibly the only way for China to grow sustainably and avoid long-term stagnation. It points to reforms such as stronger health care and pension safety nets, which could also encourage investment by private firms, and cites recent government announcements suggesting that raising consumption may become a priority.