Up until a few years ago, conventional wisdom was that China would grow at nearly double digits as long as the eye could see. Then, however, something happened, and China's 9% growth became 8%, then 7% and even lower, as suddenly the Politburo made it quite clear China would not chase growth at any cost, especially when the cost is trillions in bad debt and other NPLs, as we have explained time and again. The collapse in Chinese growth expectations is shown best on the following formerly hockeysticking chart of IMF's revised Chinese growth projections which has completely collapsed in the past few years.

However, now that "7% is the new 9%" the world may have to brace for another major repricing of Chinese growth, one which would put it just above where the consensus, as wrong as it is as usual, sees US growth in the near future: a miserable 3.9% long-term growth rate!

According to the WSJ, citing a report by the business-research group the Conference Board, China's growth will slow sharply during the coming decade to 3.9% as its productivity nose dives and the country’s leaders fail to push through tough measures to remake the economy, according to a report expected to come out Monday.

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The Conference Board forecasts that China’s annual growth will slow to an average of 5.5% between 2015 and 2019, compared with last year’s 7.7%. It will downshift further to an average of 3.9% between 2020 and 2025, according to the report.

The New York-based Conference Board argues that productivity in China is declining, in part because investments in infrastructure and real estate don’t have the payoff they once did. Meanwhile, government and Communist Party officials who don’t give market forces a large-enough role are stifling innovation.

“The state is too present in the market,” said David Hoffman, managing director of the Conference Board’s China center.

Such an outcome could batter an already fragile global recovery. But the report by the business-research group the Conference Board also finds that multinational companies in China would benefit. Lean times would give foreign firms more local talent to choose from. Foreign companies and investors could also expect “more hospitable” treatment from Communist Party and government officials and a wider selection of Chinese firms they could acquire, according to the report, which was shared with The Wall Street Journal.

Foreign companies should realize that China is in “a long, slow fall in economic growth,” the report said. “The competitive game has changed from one of investment-driven expansion to one of fighting for market share.”

Of course, there are many ways to spin the decline as a silver lining, but what is assured is social turmoil: recall that once upon a time the conventional wisdom was that China needs 9% growth just to keep pace with the natural growth rate of the population, the inbound province-to-city migration of the population, and keep everyone employed. Then the 9% became 8%, then it became 7%, and the fundamental reasoning for China's historical supergrowth was quickly forgotten, because the last thing the world needs is a reminder that Chinese social instability is always just one mass civil riot away. A riot where mass unemployment would merely serve as a catalyst for. A riot of which what is going on in Hong Kong right now is merely a pleasant appetizer.

Sadly for China's social instability, Chinese growth is going not only to 3.9% but much, much lower.

The reason? Quietly, over the past 5 years, China raked up an epic debt load, which by 2015 is expected to hit a whopping 252% of GDP, or a 100% of GDP increase in debt, just to keep its growth dynamo running. A dynamo which has now fizzled, as can be seen best in the Chinese housing bubble which as we have reported previously, has now burst, and China is desperate to keep imminent hard landing, as controlled as possible.

Here is Exhibit A.

Needless to say, this is an exhibit which China is very well aware of and is already taking measures, only not in the conventional Keynesian sense of issuing even more debt to fix a record debt problem, but somewhat more pragmatically, as we showed before in "China's Rising 'Working Class Insurrection' Problem" and, more importantly, "Stunning Images Of Chinese Riot Police Training For A "Working Class Insurrection"."

The good news for China at least, is that it is preparing for what it now quite well is the endgame. The bad news for all other Keynesian banana republics such as the US, is that when said insurrection comes, "nobody will have seen it coming."