China is falling back to earth, seemingly without a thud. The past decade was about breakneck growth. This one will be about sustainable growth – which recent economic data suggest it might be able to achieve without crashing first. That means a shift away from wasteful infrastructure investment towards consumption, while stamping out corruption and looking after the environment along the way. That is the aim, at least. But how should investors play this shift?

Equities look cheap. The Hang Seng trades on 11 times forward earnings, half the level at the end of 2009, and 1.4 times book value. But then banks make up two-fifths of the index and they are cheap for good reason – many stimulus-spending debts are yet to be repaid. Meanwhile, much of the excitement in consumer stocks is already priced in, yet costs and competition are intensifying. For example, Tingyi, the noodle company, trades on 33 times earnings. The same can be said of foreign companies with big exposure to China such as Yum Brandsand luxury goods makers. Only the valuations of US-listed Chinese stocks have cooled as short sellers pick them off.

As for resources, China is still urbanising, so there is still demand. But the binge is over and the global resources industry needs to adjust. Recent government spending plans should benefit the railway, healthcare, natural gas, and waste and water sectors, as well as those where regulation should loosen – gas price reform, for example. PetroChina has started to rally on those expectations.