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China's Economhy - Is High Growth Sustainable?

6 important questions on China's Economhy - Is High Growth Sustainable?

In the 1990s, the Chinese economy became overheated; the inflation rose to 27%. How did Premier Zhu Rongji improve the economic situation (a 'soft landing' according to the author)?

He took a number of tough macro-economic stabilization measures which included a credit squeeze and the reimposition of control on prices of certain essential commodities. This brought down the inflation to 1.1%, while maintaining an economic growth of 9% (in 1997).

Where does China's economic growth come from on the demand side?

High levels of domestic investment
High levels of domestic savings (+/- 50% of China's GDP!)

High investment and high savings create a circle of growth; high savings > high investment > high output and export growth > high GDP growth > high savings etc.

Why is the level of domestic investment high in China?

As a developing economy, China has a need for infrastructural investments in for example transportation, communications, ports, airports and power plants.

Despite fixed investment, where do domestic opportunities for economic development lie in China?

In rural areas and small towns, millions of peasants are in need of basic household consumer durables (refrigerators, cell phones etc.).
The affluent urban middle class are shifting consumption patterns toward residential housing, household goods and automobiles.
Services; e.g. education and domestic tourism.

Why should the Chinese economy rely on domestic demand instead of on external demand to generate growth in the long run?

The world market cannot continue to demand such massive amounts of manufactured goods from China. China's own size and diversity however can provide sufficient internal dynamics to generate its own growth in the long run.

How can China's economic growth be sustained viewed from the supply side?

By a growing labor force and increasing productivity (associated with a shift from low-productivity agriculture to high-productivity manufacturing).

The question on the page originate from the summary of the following study material:

Understanding contemporary China | 9781588268440 | Robert E Gamer

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China's Economhy - Is High Growth Sustainable?

6 important questions on China's Economhy - Is High Growth Sustainable?

In the 1990s, the Chinese economy became overheated; the inflation rose to 27%. How did Premier Zhu Rongji improve the economic situation (a 'soft landing' according to the author)?

Where does China's economic growth come from on the demand side?

Why is the level of domestic investment high in China?

Despite fixed investment, where do domestic opportunities for economic development lie in China?

Why should the Chinese economy rely on domestic demand instead of on external demand to generate growth in the long run?

How can China's economic growth be sustained viewed from the supply side?

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