China: Overheating Despite Slowing Growth?

China’s economy has shown signs of overheating despite a sharp slowdown in economic growth, suggesting that, constrained by the supply of labor, potential growth might have fallen significantly from its past level. With the priorities of the authorities shifting from raising economic growth to curbing inflation, they are expected to change their stance on macroeconomic policy, including monetary policy, from easing to tightening. As a result, the economy is likely to slow in 2014.

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