For decades, rapid urbanization in China created clusters of knowledge, manufacturing and distribution in areas that benefited from well-established connections to the global economy. But that growth model has reached its end. With the share of people living in cities rising to 53 percent in 2013, from 20 percent in 1981, China is shifting to a “new normal.”

According to President Xi Jinping, the aim is to ensure annual economic growth of around 7 percent, driven by new opportunities in value-added manufacturing, information technologies and modernized agricultural production. In moving toward this goal, however, China will face difficult balance-sheet adjustments that cannot easily be managed by conventional fiscal and monetary policies.

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