Policy Article

China's Growth Challenges

Kiel Policy Briefs

Against the background of the continuously weaker economic growth in China in the past few years, the Chinese government is convinced that the Chinese economy needs to adapt itself to getting used to “the New Normal”. Under “the New Normal” the Chinese economy will grow at lower rates of about 6-7% annually, whereas China would strive for substantial quality advancement that should become a core element in its future growth model in the long run. To realize a more quality- and domestic-market-oriented sustainable economic development, several reform measures need to be implemented and expanded and new reform policies need to be initiated.
Focusing on three key growth challenges faced by China—domestic consumption, innovation and entrepreneurship, and foreign trade and investment, this paper aims at providing more insight into these challenges and sketching potential policy measures that are required to deal with them. Reforms and policy measures to be implemented need to have a clear long-term orientation to support adequate long-term structural changes, and such orientation requires consistency, credibility, and transparency in order to avoid confusing signals received by market participants.