Recent media reports are fixated on the fact that China's growth rate is now below eight percent. The general concern is that without eight percent annual growth, China will not be able to continue creating jobs and sustain social stability. Big question for China: Is there a life after growth drops to 7.6 percent?

Before answering this question, it is helpful to review some history. Eight percent was set by the Chinese government as a goal of growth in 1993. Why eight percent, instead of seven or nine? Because eight percent was needed at that time to make sure China would quadruple its 1980 GDP by year 2000. No rocket science was involved when eight became China's growth target for about two decades. As a matter of fact, there is no economic model behind the magic eight as the optimal rate of growth for the nation. Now, does anyone still think the sky is falling when China grows at less than 8 percent?

Granted, 7.6 percent year-over-year growth in the second quarter is the slowest since 2009. But to say that China “might already be in recession” and ask “Will China push America into a recession?”. Get real.

Eight is a good number. The Chinese consider it a lucky symbol; it represents a growth target that is ambitious yet within reach; it is a clear policy goal that signals the direction of macro policies. Perhaps most importantly, by setting a stable GDP target and succeeding in meeting that target every time, Chinese policymakers provide investors and general public with confidence that they have the ability and every incentive to offer an environment of stable economic growth.

However, no countries can grow at 8 percent for ever—not even China. Eichengreen et al. (2011) constructed a dataset of rapidly-growing countries since 1957. They find that these countries slow down by at least 2 percentage points when their per capita incomes reach around $17,000 (in 2005 constant international prices). China is on track to achieve this level by or soon after 2015. In the course of a country’s growth, slowing down is natural it is not a catastrophe.

For China, it can actually be a good thing. A moderate slowdown can motivate the government to revisit their policy goals, evaluate policy options and set new priorities. Years of excessive focus on fast growth have left China with problems such as environment deterioration, inequality and overcapacity. If some of these challenges can be addressed effectively, at the expense of one percentage growth per year, that is very good news for China and for the world.

The world is not done with deleveraging. Demand from advanced countries will remain weak in the near future. To foster domestic demand requires years of structural changes which will translate to lower growth for the present. In this context, to hold on to that magic number eight means excessive, inefficient investments driven by the government. The greatest merit of Chinese style growth target is policy certainty for investors. In that sense, a sustainable seven may be better than an impossible eight.