Andrew Batson thinks it is simpler than many people make it out to be:
…these analyses…fail to even mention the most straightforward and direct explanation of why China’s growth is much slower today than it was in say, 2010 or 2007. It’s not like it’s a secret. From about 2003 to about 2010 China had the biggest construction boom of modern times and probably in all of human history. Then in 2011-12 the construction boom ended. That’s it. Really, that’s all you need to know. Well, you might need one more fact: housing and construction account for as much of a third of China’s GDP, once all their indirect linkages to other sectors are considered. I think a housing downturn explains very well the timing, severity and distribution of the economic slowdown that has actually occurred.
Here is the full post, which also criticizes the idea of the middle income trap. I would add two points, which may represent a deviation from Batson’s argument. First, I don’t think the Chinese growth slowdown is as sudden as a culling of media reports might suggest. Second, to the extent the contraction is sudden, it is perhaps Chinese investors have woken up to the idea of a risk premium, and realized there is no eternal ten or even seven percent growth to validate so-so quality investments. The dynamics of information arrival can compress economic adjustments into “too short” a space, a common theme in business cycle theory and not an issue restricted to contemporary China.