( CNN ) -- After many years of euphoria over China 's rapid growth and the country 's apparently inevitable rise to global economic dominance , the China story has taken a serious turn for the worse . China , it now seems , is about to collapse , and along the way it may well bring the world economy down with it . Fortunately , the new story may be as muddled as the old one . China 's economic model has relied heavily on investment and debt . It should n't be a surprise that after many years of tremendous growth driven at first by badly needed investments , Chinese spending on infrastructure and manufacturing capacity is slowing down . During the same period , debt levels surged as borrowed money poured into more highways , airports , steel mills , shipyards , high-speed railways , and apartment and office buildings than the country could productively use . A few economists predicted as far back as 2006 that China would face a serious debt problem . By 2010 , it became obvious even to the most excited of China bulls that this was indeed happening . To protect itself from the risk of a debt crisis , China must bring spending to a halt . Beijing now wants to rebalance the economy away from its excessive reliance on investment and debt , and to increase the role of consumption as a driver of growth . But this can not happen except at lower growth rates . So what happens next -- will China collapse ? Probably not . A financial collapse is effectively a kind of bank run , and as long as government credibility remains high , banks are guaranteed and capital controls are maintained , it is unlikely that China will experience anything like a bank run . What is far more likely is that in the coming years , China 's gross domestic product growth rate will continue to decline as the country focuses on stimulating consumption . Growth rates during the administration of President Xi Jinping are unlikely to exceed 3 % to 4 % on average if the economic rebalancing is managed well . Will the slower growth rate be a disaster for China ? Certainly , it would be huge departure from the growth rate of roughly 10 % a year for nearly three decades . Would much lower growth rates create high unemployment and huge dislocations for the economy ? Some are worried about such scenarios . But the Chinese economy has so far shown a lot of resilience despite passing storms such as the global financial crisis . Beijing has huge challenges ahead . China 's growth has been a boon to large businesses , the state , the powerful and the wealthy elite . What the Chinese government needs to do is recalibrate growth so that average household incomes can rise and consumers have more money to spend . This will not be easy to pull off , but there are positive signs . Xi 's government seems determined to make the necessary changes , even at the expense of much slower growth . Even if GDP growth declines but average Chinese household income grows at 5 % to 6 % a year , it would put China in the right direction . As for the rest of the world , there 's no reason to panic over China 's economic slowdown . Contrary to popular beliefs , China is not the global engine of growth ; it is merely the largest arithmetic component of global growth . What drives global growth is demand . China , with a large trade surplus , is not a net provider of demand to the world . What matters to the world , in other words , is not how fast China grows but rather , how its trade with foreign partners evolves . If China rebalances in an orderly way , its imports of manufactured goods and services should rise faster than its exports . This will be good for the world . What 's more , manufacturing industries around the world that lost out to China in the export business will benefit . When wages rise for Chinese workers -- so that they have more money to buy goods and services at home -- it means other developing countries will have a chance to compete for exports if they offer lower labor wages . There is no doubt that Beijing has a long road ahead in terms of managing a huge economy , but as of now there should be nothing surprising or unexpected about the slowing growth of China . It will probably benefit the Chinese people and the global economy . The opinions expressed in this commentary are solely those of Michael Pettis .
Michael Pettis : Some experts think that China 's economy is in big trouble . Pettis : Most likely , China 's growth rate will decline in the coming years . He says the country needs to shift from investment to consumption model . Pettis : If China recalibrates its economy in the right way , everyone will benefit .