ABSTRACT

Since the economic reforms of the late 1970s, China has experienced continuous high growth rates and a transformation of a historically unseen scale and scope. Hundreds of millions of people have been lifted out of poverty and the material infrastructure has undergone an astonishing renewal. Growth rates were maintained after 2007 by means of a massive fiscal stimulus programme. There is certainly potential for continued high growth rates but major challenges are on the horizon. China will experience the most radical demographic change in the next decades with an enormous rise in dependency rates in the next 30-40 years. China faces enormous environmental and social challenges with air pollution, toxic rivers, weak food security, huge income inequality, exploitation of workers, lack of social security and a highly inefficient health system. Further, corruption is endemic, not the least in the form of land seizures by local government officials. The challenges are caused by outdated and inefficient institutions, such as weak property rights, the system of fixed residency (hukou) and a politicized legal system, which are only partly and imperfectly offset by benevolent discretionary action by the central leadership.