The IMF Working Papers series is designed to make IMF staff research available to a wide audience. Almost 300 Working Papers are released each year, covering a wide range of theoretical and analytical topics, including balance of payments, monetary and fiscal issues, global liquidity, and national and international economic developments.
The paper analyzes the recent growth dynamics in China, evaluating both cyclical positions
and long-term growth prospects. The analysis shows that financial cycles play a more
important role than traditional inflation-based cycles in shaping the dynamics of growth.
Currently, the ‘finance-neutral' gap-our measure of the financial cycle-is large and
positive, reflecting imbalances accumulated in the economy since the Global Financial
Crisis. A period of slower growth is therefore both likely and needed in the near term to
restore the economy to equilibrium. In the medium term, growth will slow as China moves
closer to the technology frontier, but a steadfast implementation of reforms can ensure that
China follows the path of the 'Asia Tigers' and achieves successful convergence to