Tricky transitions to manage in 2016

Global growth in 2016 will be disappointing and uneven. The global economy's medium-term growth prospects have weakened as well, because potential growth is being held back by low productivity, aging populations, and the legacies of the global financial crisis. High debt, low investment, and weak banks continue to burden some advanced economies, especially in Europe; and many emerging economies continue to face adjustments after their post-crisis credit and investment boom.

This outlook is heavily affected by some major economic transitions that are creating global spillovers and spill-backs, particularly China's transition to a new growth model and the normalization of US monetary policy. Both shifts are necessary and healthy. They are good for China, good for the US, and good for the world. The challenge is to manage them as efficiently and as smoothly as possible.

China has launched deep structural reforms to lift incomes and living standards, seeking a "new normal" of slower, safer, and sustainable growth that relies more on services and consumption and less on commodity-intensive investment and manufactur-ing. But China's policymakers are confronting a delicate balancing act: they need to implement these difficult reforms while preserving demand and financial stability.