Illustration: Liu Rui/GT

The National Bureau of Statistics of China released the 2014 economic data on January 20. As had been expected, China's GDP aggregate recorded a 7.4 percent increase from a year earlier, the slowest pace since 1990. Many institutions and economists forecast a further slowdown in GDP growth in 2015, the rate of which will likely be between 7.1 and 7.2 percent.

China's economic growth slowdown is a result of multiple factors. On the one hand, it is the consequence of a reversal of the 2008-10 fiscal and monetary expansion policy by the Chinese government.

On the other, the decline in the growth rate stems from changes in China's economic structure. The past decade has witnessed the peak of China's industrialization process, and the major driving force for the economic upbeat was the feverish expansion of secondary industry. Without the global financial crisis, this upsurge would have lasted until around 2015.

The economic crisis has enormously reduced overseas demand for China's manufactured products, bringing a halt to China's industrialization. The last round of fiscal and monetary stimulus has helped keep China's economic growth on a steady track but has done little to improve the manufacturing industry, so economic growth has mainly come from fixed asset investment.

The industrialization upsurge has brought about a spectrum of positive changes to China's economic structure. During the 10 years starting from 2000, the Chinese economy was beset by a high saving rate and a low consumption rate. However, since 2010, consumption has gradually contributed to a bigger proportion of GDP.

Shrinking external demand has stimulated the development of tertiary industry, the added value of which surpassed that of secondary industry for the first time in 2014. A sluggish foreign market and rising labor wages have prompted a staggering number of enterprises to migrate inland. As the labor force flows back to central and western provinces and the regional gap narrows, Chinese residents are marching toward equality in income distribution. It is projected that this trend will continue in the near future. By 2020 an economy mainly driven by domestic demand will have taken shape in China, which will have become an important consumer of global products.

Will structural transformation inevitably lead to a steep drop in economic growth? According to the experiences of some successful economies, reaching the peak of the industrialization does not mean a sharply downward economic shift. For example, Japan maintained an economic growth rate of more than 7 percent for over a decade after its industrialization peaked in 1970. South Korea's average economic growth rate stayed at 8 percent after its peak in 1988. In retrospect, we find that it was at the end of the industrialization pinnacle that these countries' industrial products started to go global and play a dominant role on the world stage.

In the 1970s and 1980s, Japan's electronic and automobile products became popular the world over, and the tide shifted to South Korea in the 1990s. Industrialization laid a solid foundation for the manufacturing industry in both countries, and corporations were forced to launch large-scale technological innovation to produce better and higher-quality goods. This phenomenon is now happening in China.

The 30-year reindustrialization process since reform and opening-up began in 1978 has endowed China with a robust manufacturing sector, and the structural transformation triggered by the international economic crisis has compelled firms to adopt changes to seek technological progress.

It is predicted that China will take over the electronic and automobile industries in the next 10 to 20 years. Apart from this, the combination of the Internet and traditional industries will contribute to a new breakthrough in China's economic development. Therefore, it is completely possible that China will sustain an economic growth rate of 7 percent over the next decade.

In the short term, China may have more optimistic growth prospects in 2015 than the market forecasts. The Chinese government has stopped fine-tuning easing fiscal and monetary policies.

A sign of rebound has also emerged in the property sector, so previously reined-in housing prices in second- and third-tier cities will recover to a certain extent.

The international economic landscape, particularly the US economic scenario, will perhaps be better than imagined. Given the closer bond between the Chinese economy and that of the US, China will benefit from the US' growth. In conclusion, it is possible that China's GDP growth rate in 2015 will remain basically the same as that of last year.

The author is dean of the National School of Development and director of the China Center for Economic Research at Peking University. [email protected]