Expect some "sky is falling" headlines on Friday when China releases its most recent figures oneconomic growth, estimated to clock in at an annualized 7.7 percent, the slowest rate in three years.

The more important issue is what China's leaders should, or can, do about it.

China has produced a tattoo beat of disquieting news since March, when Premier Wen Jiabaolowered the government's growth target for 2012 to 7.5 percent, down from the 8 percent target in place since 2005. Real estate prices, trade growth, construction and luxury watch sales are all declining. The government has issued stern edicts for officials to cut back on flashy cars, banquets and other perks.

Overseas, the global economic slump and the persistent crisis in Europe have left China's mighty export engine revved up but with fewer places to go. Increasing exports to the U.S., which just displaced the European Union as China's biggest foreign market, risks even greater trade tensions in a U.S. election year.

As a result, Wen is focusing on homegrown methods to boost growth, such as promoting domestic investment. This strategy risks repeating the excesses of the 4 trillion yuan ($586 billion at the time) stimulus package of 2008, which fueled inflation, pushed credit beyond sustainable levels and led to a property bubble. It also favors large, and often inefficient, projects by state-owned enterprises over small and medium-sized companies: Witness the government's decision in May to approve an $11 billion steel plant, for an industry in which there is already excess capacity.

Public Goods

A better approach would be for China's government to help its people and their economy by putting more money into public goods. According to World Bank data for 2008, China spent only about 1 percent of its gross domestic product on health, 3.7 percent on education, and 4.7 percent on pensions and other forms of social protection. The averages among members of the Organization for Economic Cooperation and Development are 6.3 percent, 5.4 percent and 15.2 percent, respectively. With more than $3 trillion in foreign reserves and a relatively light public debt burden, China is in a better position than most to shoulder such expenditures.

Beyond that, China needs to rely more on domestic consumption -- a point Bloomberg View has argued. To some extent, this is already happening: In the first quarter of 2012, domestic consumption accounted for 43 percent of GDP growth, versus 28 percent a year earlier. Rather than trying to support this trend artificially with cheap credit, China should put in place the kind of structural reforms that will create real spending power.

David Fuller's view With its western export markets remaining soft, to put it mildly, China knows that it needs to develop its domestic economy, and it is. It will balance this with some carefully targeted infrastructure spend, thus the modern steel plant mentioned above, which will be more efficient and less of a polluter than earlier mills.