The Untold China Story.

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CORRECTION: Clarification: In Stephen Roach's May 8 column, "The Untold China Story," it was incorrectly stated that China's private consumption fell to a record low of 50.7 percent of GDP. In fact, private consumption fell to 39.8 percent; the 50.7 percent figure includes both government and personal consumption.

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Byline: Stephen S. Roach (Roach is the chief economist of Morgan Stanley.)

China is sending the world a very important message. A critical correction is now underway, moving the country from an export- and investment-led growth strategy to one balanced by healthy consumer spending. This change will not be abrupt, but it will reshape China. Its main aim is greater internal stability, but it will also have profound implications for major imbalances in the

world economy--namely, tempering Asia's excessive saving and its huge demand for oil and other commodities. By fixating on the perceived threat of Chinese exports, the world is missing the biggest economic story to come out of China in 25 years.

In their new five-year plan, and in discussions this March in Beijing in which I took part, China's economic leaders effectively conceded that the strategy of resource mobilization--recycling a huge reservoir of domestic saving into export- and investment-led growth--has outlived its usefulness. They left no doubt that they understand the risks of staying that course: China's overreliance on exports and investments feeds trade frictions abroad and excess capacity and deflation at home. Exports and investments, now accounting for about 75 percent of Chinese GDP, and together still expanding at nearly 30 percent a year, must slow.