What Could Brake China’s Rapid Ascent in the World Economy?

Friedrich Wu

Published: September 2006

There has been much hype about China’s rapid ascent in the world economy. For instance, economists from Goldman Sachs and the OECD have predicted that the Chinese economy will overtake the Japanese and the US economies well before the mid–21st century. However, these optimistic, straight-line projections are based on extrapolations from past trends, without paying sufficient consideration to the many challenges that China must face going forward. This paper aims to balance this sanguine perspective by identifying a number of near-, medium-, and longer-term potential “growth-decelerators”—i.e., economic overheating, widening regional and rural–urban economic divides, banking sector fragility, environmental degradation, rampant corruption, an ageing population and military conflict with Taiwan—that could possibly brake China’s rapid ascent in the world economy. It also seeks to examine how these potential “growthdecelerators” would impact China’s future expansion trajectory.

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