This external recession is going to be large by any standards. It may push China’s export growth near or below the zero rate of the worst period of the Asian financial crisis. Slow export growth may last for longer. Exports now represent a much larger share of the Chinese economy and so have greater leverage over the growth process. And China now has a much more important market economy, in which the normal business cycle of a market economy can exaggerate the initial impact of external shocks.

Growth will be significantly weaker than the average of the reform period over the next 18 months.

But with good policy, China can avoid a major slump, as it did a decade ago.

These are the concluding points in a paper delivered at the inauguration of the National School of Development at Peking University, a digest of which was published in the Australian Financial Review on 27 October 2008 [link paywalled].

Update: Full paper presented is Thirty years of Chinese reform and economic growth: Challenges and how it has changed world development [pdf]