China: Circumstances, Intents, Hardships and Risks when Transiting from a Production-Led Economy to one Focused on Consumer

Abstract

Chinese economy has grown rapidly and substantially for decades, without facing a serious crisis or destabilization and without suffering a correction, but this doesn’t mean that it has definitely avoided corrections. On the contrary, it might signify that a correction is possible anytime, risking to be the harsher the later it happens. China’s numerous achievements are undeniable, but some of the very mechanisms that have nourished its successes – mainly the distorted price system (relying on controlled, low prices for labour, capital, energy, land, natural resources, national currency, zero pollution costs, etc.) – are the ones which now hinder its further modernization and growth dynamism. Excessively forced to grow very fast, Chinese economy developed structural imbalances and economic bubbles in almost each of its systems. This paper looks at some of the most dangerous economic bubbles and their linkage, as well as at the challenges and risks posed by the Chinese economy transition from export-and-production-led growth, to consumption-driven development.

Keywords

• China
• economic bubbles
• economic rebalancing
• structural imbalances
• new normality