Economic Growth of China

The rebalancing of the economic growth model as a solution to China’s internal problems

Abstract

This project describes how the rebalancing of the current economic growth model could overcome the internal challenges China is facing in its path to a global economic power. It also examines some proposed and implemented economic solutions. Having survived the global financial crisis and expected to surpass Japan as the second largest economy, China still faces serious domestic problems that have to be tackled for a harmonious and sustainable future economic growth. Its massive unemployment, environmental degradation, growing energy demands and widening income inequality is believed to threaten its social stability and economic growth in the long run. Many researchers such as Nicholas Lardy (2007) believed that the investment and export-reliant structure of economic growth has a responsibility in the rising domestic problems. This paper stresses the importance of rebalancing the economic growth structure as a mean to alleviate some of the significant problems discussed. Subsequently, it points out the current official policies constraints and ineffectiveness. It concludes by suggesting that a more rigorous multi-facet approach is necessary for success because all policies are interdependent and may be conflicting if not well-coordinated.

Introduction to topic

China is facing multiple domestic challenges as it progresses economically. With an average of 8.45% gross domestic product expansion in 2009, China is the world’s fastest growing economy and is set to overtake Japan as the second largest economy in the world. However, worsening environmental degradation, energy security, growing income disparity and unemployment rates are the consequences of economic growth combined with a population over 1.3 billion. These are some of the prominent challenges China will have to overcome in order to preserve long term national growth and social stability. It is...