Question

Chinese economy has grown at an average annual rate of close to 10 % in the past 40 years. Going forward, what are the challenges to maintaining high growth rates and what have been the government policy responses to those challenges – if any. Where do you see China going in the coming decades?

Answer 1

Over the past 40 years, china has been able to deliver the growth rate larger than 10 % per annum. The growth rate of China was close to the 14 % in the year 2007. China lifted out the 800 million people out of poverty. it was the biggest success in the history of mankind. The Chinese growth is predominately the export-driven.

but now growth rate of china has come down to the 7 % and which is matter of worry. China can not continue to grow exponentially. The china might face the problem of middle income trap. The growth rate of china will come down to the 5 % in the coming years. Trump administration and other countries are imposing the heavy tariffs on the cheaper import from the china.

Following are the few key challenges that might face the chinese economy:

• All economies are moving towards the inward looking policies and these policies are likely to affect the export earning of china.
• China is going to face the middle-income trap, thus china has to make a huge investment in the research and innovation activities. The growth further can be raised only through technological development.

Now china can not feed on the growth through coercive methods and unethical trade practices, it would have to follow the international standard, thus growth is likely to be retarded.

Now the COVID-19 is going to affect the growth of china disproportionately. Firms are leaving the china to elsewhere. India is going to give tough competition to the china over the coming years. Further, US and other coutnries are taking the tough actions against the chinese policies.