CHINA'S National People's Congress last week set a 7.5 percent official GDP growth target for this year. Lin Yifu, former and Senior vice president of the World Bank and one of China's most important economists, predicts that China can maintain 8 percent annual growth for 20 years. A key question is evidently whether such targets are realistic, can China maintain this type of growth rate?

The negative factors are evident. The international context for China's economy this year is bad. The Eurozone economy is shrinking, Japan is stagnant and US growth is anemic. A 16 percent fall in world commodity prices since their peak has led to slower growth in major developing economies such as Brazil.

China's policy makers initially underestimated the problems in the advanced economies. Adjusted for inflation, imports by developed economies have not regained pre-financial crisis levels. China therefore did not achieve its 2012 target of a 10 percent trade increase - the rise was 6.2 percent. The lower 8 percent trade growth target set for 2013 is more realistic if still challenging. All major motors for growth will therefore have to come from China's domestic economy.

In terms of strengthening China's relative international economic position, and maintaining its ranking as the world's most rapidly growing market, all this makes no difference. China is the world's most open major economy, so it cannot cut itself off from international trends. China's growth rate inevitably goes up or down with global economic fluctuations - the constant is that China strongly outperforms these trends.

To give more precise numbers, a rule of thumb of over 20 years, which successfully passed the test of events, is that China grows on average at whatever the advanced economies expand at plus 6 percent - the greater outperformance during the financial crisis was untypical. Developed economies this year will probably grow at around 1.5-2.0 percent, implying China will grow at 7.5-8.0 percent - in line with official forecasts. This is consistent with the official target of doubling the size of China's economy between 2010 and 2020.

But for estimating expansion of China's market, and growth of living standards, the absolute rate at which China's economy develops is obviously key. It is therefore worth looking beyond short term ups and downs to the fundamental factors determining how fast an economy grows. This makes clear why China will achieve its 7.5-8 percent growth target. It also eliminates "manic-depressive" analyses of China's economy - periodic oscillating predictions of "hard landing" and "rampant growth" which appear in some parts of the media.

Infatuation with consumption

The current infatuation with examining consumption in China's GDP is misleading in terms of analyzing its economic performance. A country's consumption growth is overwhelmingly determined by its GDP growth - internationally 87 percent of consumption increase is determined by the latter. If China's GDP grows rapidly, consumption will grow rapidly. If China's GDP growth slows, its consumption, over anything other than the very short term, will be lower than its potential with high GDP growth.

Every economy's growth, including China's, is necessarily determined by two key parameters: how much it invests and how efficiently that investment creates growth. Taking the five year average for 2006-2011, the latest internationally comparable data, China's fixed investment was 43.1 percent of GDP, and it invested 4.1 percent of GDP for its economy to grow by a percentage point. Consequently, as a matter of simple arithmetic, China's economy grew an annual average 10.5 percent.

The lower the percentage of GDP invested for any given economic growth, the more efficient that investment is. Furthermore, contrary to some myths, China's investment is extremely efficient by international standards. For example, in 2006-2011, China needed to invest 4.1 percent of GDP to grow by one percentage point whereas the US invested 24.3 percent - China's investment was six times as efficient in generating GDP growth as the US. Even before the international financial crisis, the US invested 7.0 percent of GDP to grow by one percentage point, compared to China's 3.4 percent. These key numbers determine how fast China's economy grows.

If China's economy is to slow, as some Western critics argue, then it is necessary one or both of these key parameters changes. Either China's percentage of investment in GDP must fall or the efficiency of its investment in generating GDP growth must decline - there are no other choices.

Taking first investment efficiency, the graphic shows that almost all economies were negatively affected by the international financial crisis. China was no exception - the percentage of GDP which had to be invested for its economy to grow by a percentage point rising from 3.4 percent to 4.1 percent. But this deterioration was less than for most countries - the US figure rose from 7.0 percent to 24.3 percent, and Germany's from 8.2 percent to 18.4 percent.

China's investment efficiency would have to fall greatly not to achieve its 7.5 percent growth target. If China's recent investment level was maintained, then the percentage of GDP it needs to invest to grow by a percentage point would have to rise to over 5.7 percent before China failed to hit its growth rate target. Maintaining China's efficiency of investment is therefore a constant challenge for the government, but China has a considerable safety margin in setting its target growth. The government's entire focus is on maintaining the efficiency of investment, not reducing it.

Investment growth

The other possibility for slowing China's economy would be a sharp reduction in the percentage of investment in GDP. There are certainly some in China advocating reducing the level of investment in GDP, but not by nearly enough to prevent China hitting its growth targets. At its present level of investment efficiency, China's GDP growth rate falls by 1 percent for each 4.1 percent reduction in the percentage of fixed investment in GDP. But in the last five years China's annual GDP growth averaged 10.5 percent. To reduce China's GDP growth below 7.5 percent requires a fall in the percentage of investment of GDP of 10 percent. No serious figure in China, as opposed to a few Western analysts, advocates this. A fall in investment share of 2-4 percent of GDP, the type of figure sometimes advocated, would only slow China's economic growth by 0.5-1.0 percent.

Therefore international economic headwinds are negative. But in both the efficiency of its investment and the percentage of investment in GDP, China has considerable safety margins for achieving its growth targets - unless the administration makes very large errors the growth targets will therefore be met. Indeed, looking at these margins of maneuver, Lin Yifu's 8 percent is perhaps more realistic that the government's 7.5 percent - administrations always like to announce they have exceeded targets.

John Ross is currently visiting professor at Antai College of Economics and Management, Shanghai Jiao Tong University. He was consultant to Fortune Global 500 companies and from 2000 to 2008 London's director for economic and business policy.