Kevin Lynch is Vice-chair of BMO Financial Group, and former clerk of the Privy Council of Canada

The September visit of Prime Minister Justin Trudeau to China was a success, on many levels, and signalled renewed Canadian interest in stronger commercial links. The uncertainty about trade relationships as a result of the incoming Trump administration in the United States only adds urgency to the need to diversify Canadian trade toward Asia, particularly China.

So, given this, where is the world's second-largest economy headed? Too much time is spent parsing quarterly Chinese growth statistics and not enough on understanding the massive economic restructuring that China has embarked upon. While the quest for more sustainable growth is not unique to China, the scale and the scope of its restructuring challenge are unprecedented.

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Many economies are experiencing persistently lower growth, including Canada. From high single digits, Chinese annual growth is trending toward 6 per cent, according to the International Monetary Fund, and with a surprising degree of regional variation: Some provinces are booming while others are in recession – a political problem anywhere.

What is going on? Structural drivers of global growth are losing steam. Among the causes are: aging demographics; slowing productivity; increasing impediments such as regulatory inefficiencies, lack of competition and congestion in many emerging economies; rising debt and debt leverage. All apply to China, and the net result is lower potential growth.

The growth risk from rising leverage is particularly worrisome: corporate debt in China has skyrocketed from 68 per cent of GDP in 2007 to 145 per cent of GDP today. The IMF has flagged high and accelerating Chinese corporate debt as a key risk to sustainable growth, and an impediment to rebalancing reforms. A central aspect of reform in China is the need for rebalancing the economy – a singular objective, but with many complex elements. What are they?

First, there is external rebalancing, which refers to shifting from export-led growth, a pillar of China's economic strategy for decades, to domestic-demand-led growth.

Second is domestic rebalancing, which is fiendishly complex and requires large-scale structural shifts: from industry to services; from investment to consumption; from government-owned production to the private sector; from low-productivity production to more innovative production; and from excessive corporate leverage to sustainable levels. None are easy, vested interests are many and adjustment programs for millions of displaced workers will be needed.

There is also income distribution rebalancing, where high and growing income inequality of the sort China is experiencing may affect confidence, entrepreneurship and the social contract.

And then there is environmental rebalancing in a world concerned about climate change and the environment, and China needs to worry seriously about both.

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How is the Chinese rebalancing act progressing? The first observation is that much progress has been achieved, with reforms ranging from fiscal reforms, external sector reforms, financial-sector reforms to domestic reforms. The rebalancing to services is striking, with China emerging as a world leader in e-commerce.

The second observation is there is still lots more to do.

Specifically, integrated and mutually reinforcing structural reforms, combined with complementary financial-sector renewal, are essential. Indeed, it is hard to see how progress on a number of interconnected structural problems – excessive corporate debt; ineffective corporate restructuring; insufficient corporate competition; inadequate corporate innovation; and inefficient energy usage – can be tackled without further reforms to the financial sector, and vice versa.

Strengthening the links between the financial system and the real economy is a concern for policy makers everywhere. China is no exception. Broader and deeper capital markets, where market forces play a greater role in the efficient allocation of capital, are essential. More liquid corporate bond markets, better-functioning equity markets and less reliance on bank financing of corporations are key elements.

The opportunity for China from tightly integrated, clearly communicated and well-executed structural reforms, according to the McKinsey Global Institute, could be in the order of $5-trillion. Not a bad return from a government investment in rebalancing.