The Risk Factors Contained in China's Economic Growth

ABSTRACT

Despite the warning of an overheating economy, China maintains its high economic growth of 8-9% a year. Many are concerned about how long this type of growth will continue.

China's economic program and system reforms must be directed at rooting out the dangers that threaten the sustainability of its growth. In order to do this, it is important first to understand the economic environment currently surrounding China and then to identify the risk factors contained within.

Presently, the largest threat to economic growth is the mismanagement of public corporations. The primary investors in plants and equipment, these corporations are responsible for, among other things, putting large amounts of sour loans onto the balance sheets of the national banks. In order to attain sustainable economic growth, it is necessary for China to fundamentally re-think its economic model. Meanwhile, systematic tax reform is essential to narrowing the income gap, leveling the income standards across the nation's regions, and thus ameliorating social discontent.

With the start of the Jintao-Jiabao administration, the 'scientific approach to development' has been propounded as the way toward balanced economic growth. Reduction of the income gap and adjustments of the economic environment both lie at the heart of this concept.