NEW YORK (TheStreet) --China is shifting away from relying on exports and foreign investment toward an economy driven by consumption.Unsustainable government debt levels and environmental problems have prompted this change. Over the past five years, accommodative monetary policy and surging investment levels have led to average growth rates of 9.3%. Times have changed, however, and that growth won't last. China's shift will weigh on growth, pushing growth domestic product growth down to the 6% region in the next half-decade. On the positive side, a declining work force will help the country avoid the usual increase in unemployment that tends to accompany this kind of transition. China's target growth figure for 2013 is 7.5%, slightly above the rate of expansion necessary to absorb new participants in the labor market. By 2018, the GDP growth rate required to maintain stable employment levels will drop below 6.5%, with unemployment contained by an aging and shrinking workforce, and by increases in service-sector jobs in areas like logistics.
China's finance ministers will face credibility issues if the transition from a manufacturing economy to a service economy fails to generate sustainable employment. In early 2010, Chinese GDP grew by 11.9%, and has fallen by nearly 4.5 percentage points since then. This quarter, economic data are showing signs of stabilization and building business confidence. Figures from the labor ministers indicate that jobs in urban centers increased by 7.3 million, a slight improvement from the 6.9 million seen at the same time last year.