"The country is trying to shift its economy away from an export-driven and investment-led one to a more balanced, consumption-oriented economy," Goldman said in the report, headlined "Walled In: China's Great Dilemma."
"A complex and interconnected reform agenda has never been achieved on this scale. The transition, if accomplished, is unlikely to be smooth."
"We therefore recommend clients adjust their exposures to emerging market assets," it said.
"Developed economies will not be immune from any volatility emanating from China, but the direct and indirect economic impacts will be lower for them; still, we expect that financial markets in developed countries will overreact as they did in August 2015 and again in early 2016."