The Beyond the Miracle series – written by Yiping Huang, Jian Chang and Steven LingxiuYang and launched in September 2011 – carefully analyzes the transition that China is undergoing from various perspectives, and also discusses the economic and financial market implications. It argues that China will successfully make the transition from‘economic miracle’ to normal development in the next decade (Chapter 1). But there is an important caveat: China must embark on a multi-pronged set of reforms if the country is to move to a slower, more sustainable growth rate that deemphasizes trade,construction and investment and instead places a greater weight on consumer spending as a source of growth. Each chapter provides an in-depth analysis of the task at hand – from financial reform (Chapter 2), to housing reform (Chapter 3), to the pivotal role of consumption inrebalancing China’s economy (Chapter 4). For China to avoid becoming a source of inflation in the future, its monetary policy-making, too, will need to be reformed(Chapter 5). China’s ageing population will also mean an end to its surplus of cheaplabor, heralding a new era of rapidly rising wages (Chapter 6). In turn, this could putadditional pressure on the country’s fiscal outlook, as it seeks to meet growing pensionliabilities (Chapter 8).
These challenges notwithstanding, the series is optimistic on the outlook for China. It argues that the Chinese economy is in the middle of a major andbroad-based structural transformation that will lead the country to a more sustainablegrowth potential of 6-8%, from a double-digit pace previously. As China continues togrow and upgrade, its outward direct investment should rise quickly (Chapter 7). Andby narrowing the technological gap with the advanced economies, China should be ableto avoid the “middle income trap” and graduate to the global high-income group withinthe next decade (Chapter 9)
China: beyond the miracles
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