Adjusting China's Growth Path

The prolonged slowdown in China's economy has generated a fierce debate about whether the country needs a new "growth model." All economies, however, are guided by the same growth model developed decades ago by Nobel Prize winner Robert Solow showing that expansion depends on growth of investment and labor along with productivity. These principles have not changed, but some adjustments are now required in the path China is taking. Some observers have called for a more consumption-driven growth process and others see innovation as the solution, but neither approach actually meets current needs.