Recent data from China covering the first quarter of 2015 confirm that Chinese growth is as low as it was during the GFC, when the entire world economy (with the notable exception of Australia) plunged into the deepest recession since the Great Depression in 1930-1933. This time however, world growth, though a little weaker than it has been, is still positive.

The weak data prompted optimism that the Chinese government and the People’s Bank of China would increase stimulatory measures to push Chinese growth upwards, and indeed, there was a significant reduction in bank liquid asset ratios, signalling the PBOC’s easing stance.

There is no doubt that growth will accelerate, but to what rate? For 7 years, excluding the slump caused by the GFC, Chinese industrial production grew at about 17% per annum, and for the 7 years before that, it grew at 10% per annum. So, at first sight, this would be the sort of growth rate the government would be aiming for.

However, there were many problems with the helter-skelter growth of the last 18 years. To mention just a few:

• Growth was extremely unbalanced with more than 40% and sometimes as much as 50% of GDP derived from gross fixed investment.
• Huge current account balance of payments surpluses, in absolute terms and relative to GDP, which created political irritation in China’s trade partners.
• Large-scale corruption by public officials.
• A rise in imprudent lending and “shadow banking” by the Chinese banking system.
• Rapidly increasing pollution, of land, water and air.
• A surge in CO2 emissions to the extent that China is now the world’s largest emitter of carbon (29.3% of the total), twice as much as the next largest emitter (the US). Global warming will adversely affect China via fiercer droughts and floods as well as rising sea levels (Shanghai for example, home to 24 million people, is on average just 4 metres above sea level).
• Unequal development across the nation, with most of the growth concentrated in eastern provinces which are far richer than internal provinces.

Even if the Chinese government wanted to accelerate growth back to previous high rates, it would struggle because of the declining population growth rate and the rise in the aged population as a percentage of the total as a result of the one child policy introduced in 1980.

Chinese government policy has shifted away from emphasising growth at all costs and an emphasis on capital goods towards promoting consumer spending, clean industrial production and clean energy. This shift has particularly affected coal, where China consumes more than 50% of global coal production.

While growth will pick up in China, it is unlikely ever again to reach the heady heights of the early noughties. This means that even if the prices of Australia’s commodity exports do rally, they will not go back to the record highs achieved 6 or 7 years ago.