China's GDP has grown at nearly 10 percent every year since 1978, thanks to cheap and plentiful labor, cheap and plentiful natural resources, liberal economic reforms, and what the author calls the "opening dividend": Exports grew 30 percent in the first half of the last decade, and China's share of the world's manufacturing doubled between 2000 and 2007.

All those engines are still chugging, but they're also slowing down. Liu Shengjun explains why:

China's export surplus will gradually decrease along with the deleverage of US economy after the financial crisis. Meanwhile, the share of FDI in GDP declined from 4.5% in 1998 to 2.5% in 2007. China is growing short of labor. With the increasing power of unions, labor costs will rise over the next decade. China's old, nonworking population will climb from 7% in 2001 to 14% in 2026. The country's resource sustainability is now approaching its limit. The quick economy growth was achieved at the cost of severe environmental pollution due to local government's excessive pursuit of GDP. China's thirst for strategic resources such as iron ore and petroleum caused huge price increases in global market and serious pollution in China.

Read the full story at HBR.

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