ABSTRACT
This chapter pinpoints the growth bottlenecks facing China, which are very much converged with those facing the Latin American and Middle East countries trapped in middle-income. The spectacular success of the Chinese economy is beyond argument. The initial achievement is attributable to the institutional changes that allow continual flow of rural surplus labour from the countryside to the cities, which enables China to utilise its abundant labour supply to produce and export goods according to its comparative advantage. However, growth bottlenecks started to emerge in the mid-1990s. The improved balance sheets faced another challenge when the central government initiated the “4-trillion-stimulus package” in 2008 to buffer the economic downturn caused by the global financial crisis. Economic growth and improvement of people’s livelihood are critical cornerstones of China’s ruling party’s legitimacy. China’s sustained growth rests on central leaders’ decisive departure from the downturn-stimulus policy pattern, without which growth will gradually decline and the maintenance of growth and employment will be costly.
