Structural Change, Rebalancing and the Danger of a Middle-Income Trap in China

Abstract

China is currently experiencing a structural change toward tertiarization and an implied growth slowdown associated with it. The paper investigates whether this growth slowdown is merely cyclical or a negative trend, and further what China is doing or should do to avoid falling into a “middleincome trap”, a problem many emerging economies have experienced in recent decades. The pitfalls of the current “soft” rebalancing policy in China are analyzed in the context of this development.