ABSTRACT
China’s rapid economic growth depends on the capacity of its government to set maximum sustained growth as social objective, maintain high saving rates, reduce transaction costs, facilitate business deals and maintain social stability. Countries without such capacity are unlikely to apply the China model. The advantage of backwardness and trade barriers allowed by the World Trade Organization (WTO) for developing countries to protect their industries are also important conditions for China’s success. As China becomes a middle-income country and the economy approaches its steady state, the catch-up effect diminishes, so does the effect of high saving rates on economic growth. Developed countries especially the US become increasingly intolerant of China’s trade barriers and the trade war between China and the US begin to affect China’s growth. These factors determine that China’s growth rate would continue to slow down if there is no deeper reform in China’s economy. To maintain the current growth rates for a longer term, China needs to address structural issues, manage real estate bubbles, improve social security system, reduce income inequality, become more open in international relations and promote the rule of law.
