10/31/2014 08:51 am ET Updated Dec 31, 2014

Will This Be the China Century?

China reported its economy grew "only" 7.3 percent in the third quarter, below the projected 7.5 percent. If China fails to meet its target for the year, it will be the first time since 1998. China's long-term growth prospects seem weaker still. The Conference Board sees its growth slowing to an average of 5.5 percent from 2015 to 2019, and possibly lower still after that, though long term economic projections are notoriously unreliable.

Of course, the U.S., Europe and many other countries would gladly accept 7.3 percent or even 5.5 percent. Even so, it does appear the bloom is off the rose of China's economic miracle. China was logging growth above 10 percent year after year, but that was from a low base. As China's economy has become a behemoth, second only to the U.S., it is finding robust growth increasingly difficult to achieve, as it is with all developed nations.

The proximate cause of China's current distress is a property bubble -- as exemplified by the Potemkin villages of millions of unsold housing units reported on CBS's "Sixty Minutes." China's property sector accounts for half of its GDP when related industries such as steel, appliances and construction are included. China is a prosperous country overall but the average citizen is still poor by western standards. There is simply no way they can afford to buy millions of expensive high rise condos, many of which are sitting empty. Millions of middle class Chinese have invested their savings in abandoned housing projects. Housing prices in China are plummeting by more than 10 percent a year, and the decline is accelerating. We know all too well how this story plays out.

China's economic slowdown is a big problem for the world economy. China is a major market for commodity producers, and one of the largest recipients of foreign investment. Australia for example has been on a binge supplying raw materials to the expanding Chinese market. By some estimates, China accounts for a fourth of the world's growth. China's difficulties along with weakness in the European Union suggest anemic growth in the years ahead for most of the world's major economies.

The question is what happens next. Are we embarked upon the China century? If China weathers this storm, and resumes its 7-8 percent a year growth, it will soon become the world's dominant economy. This scenario is plausible because China is only half way through its process of urbanization and has roughly $5 trillion in reserves to help it through the tight spots.

On the other hand, no country has ever had 6-10 percent annual growth for more than 30 years. China has already reached the end of that cycle. From here on, economic growth will become more difficult to achieve. Also, the Chinese economic and political systems are not flexible enough to manage a soft landing. The Chinese miracle is real but the yellow brick road to prosperity, as we all know only too well, is littered with potholes.

Jerry Jasinowski was President of the National Association of Manufacturers for 14 years and later The Manufacturing Institute. You may quote from this with attribution. Jerry is available for speaking engagements. October 2014