China: Hitting the middle income wall

Worries over China’s economic performance in 2015 will continue into the future – and are breaking through into Chinese media.

“China: Hitting the middle income wall”, edited by Francois Godement and Agatha Kratz, is the latest edition of ECFR’s China Analysis, which examines Chinese-language sources to understand the Chinese view on current affairs. The collection examines Chinese responses to a summer of economic turmoil and highlights that, although concerns were staved off in the short term by state intervention, unanswered questions remain over the future of China’s economy.

In the collection:

Thomas Vendryes examines thefuture of Chinese manufacturing, which has been the main engine of the growth for the “factory of the world” over the past three decades, While China’s official discourse points to a gradual convergence towards a “new normal”, there is strong evidence pointed too by Chinese authors about the structural imbalances of China’s past growth.

Hongmei Ma explores the policies underpinning China’s new plan for industry: “Made in China 2025”, a phrase which has become something of a buzzword in China. Chinese authors examine the background to the strategy and assess how it will work in practice.

Agatha Kratz takes a look at the Chinese government’s decision to intervene to stop the fall of the stock market in July 2015. While the intervention was successful in stabilising the markets in the short term, it had a high cost in both financial and reputational terms.

She scrutinises Chinese authors who identify both market-related and government-related causes for the market turmoil, and explain why the government’s action was only partially successful. These authors also examine the meaning of the rout in the longer term, raising concerns about China’s economy and its prospects for reform.

In the final contribution Alicia Garcia Herrero examines several growth scenarios for the Chinese economy over the next five years. The outcome will depend directly on the type of action the government decides to take to support the economy and highlights the fact that it will be the mixture of demand-side fiscal and monetary policies, and supply-side structural reforms that will determine China’s rate of growth for the next five years.