After a period of robust expansion, the economic growth story for Asia-Pacific is changing.
The model of modern Asia-Pacific growth used to feature a heavy dose of exports and productivity. Both external demand and productivity growth have helped propel Asia Pacific gross domestic product (GDP) higher in recent times.
But this model appears to have ended, or at least entered a new and much slower growth phase.
Both the (real) net export contribution to growth and productivity growth have stalled since the global financial crisis. These changes increasingly appear to be structural. That is, they will not likely revert back to the good old days.
While India will still lead the region in terms of growth, China's economy, by nature of its sheer size, will still play a dominant role. We remain confident that Asia-Pacific will outperform the rest of the global economy.
According to our baseline estimates, real GDP growth in Asia-Pacific will be flat in 2016 at 5.3 per cent, before slowing a touch to 5.2 per cent in 2017.
This changed environment poses a challenge for the Asia-Pacific region.
The (quite natural) temptation is to treat the decline in net exports and productivity growth as cyclical. This means borrowing to support consumption and growth in the interim, a process that has been aided by ultra-low global interest rates, which much of the region imports by managing currencies tightly with respect to the US dollar.
Acting as if these phenomena are temporary is beginning to look like a policy mistake.
As the data continue to come in, the conclusion that something structural is amiss has become increasingly robust. Put simply, the hope for recovery of growth and the related hope for the ability to smoothly service the region's new pile of debt may not materialise.
Despite this doom and gloom, all is not necessarily lost. Just as old drivers of growth fade, new ones appear. I expect the region's new growth driver will be consumption by the rising middle class. The leader of this drive will be China as the region's largest economy rebalances to a less investment-heavy model.
While it is still early days and Chinese data are less than totally clear, there are signs of such rebalancing happening. Some of this is anecdotal, which suggests that the official statistics may take some time to catch up.
But around the region, from the producers of premium food and beverage products (New Zealand) to high-quality consumer goods (Japan and Korea) to pharmaceuticals (Australia) to tourism (Japan and Thailand among others) and beyond, there are indications of a growing footprint of Chinese consumer spending.
And there is plenty to go around. The average Chinese province has a population of over 40 million. China's consumers have been (at least partially) involuntary financiers of the country's long investment boom. It is now their turn to take the growth baton.
The key question in all of this is: Which economies in the region can reorient to meet this challenge? A crucial element here is flexibility.
The economies in question must be flexible enough to move resources, including people, from the old growth sectors to the new ones, and provide credit and other financial support along the way. These are structural changes and involve a fair amount of "letting go". Australia appears to be at or near the cutting edge in the region in this process. Can Asia-Pacific's emerging markets follow suit?
The reward could be new and likely long lasting sources of growth.
Congratulation!