The Causes of China’s Current Economic Difficulty and Its Solution

Qing-Ping Ma ()
Additional contact information
Qing-Ping Ma: University of Nottingham Ningbo China

Chapter Chapter 13 in Advances in Applied Macroeconomics, 2025, pp 239-260 from Springer

Abstract: Abstract This study investigates the causes of China’s current economic difficulty. After four decades of rapid development, the Chinese economy faces slow growth, a high debt burden, and a real estate crisis. China’s current economic difficulty has two root causes: interest rate-control-induced overinvestment and restrictions on entry to many sectors. The former has produced overcapacity and low labor income such that economic growth depends heavily on exports and new investment; the latter has blocked competition-led efficiency gains in those sectors, which might generate additional economic growth. Since overcapacity has reduced returns to capital and profit margins and firms cannot increase employees’ wages, the first measure to address the current difficulty is to raise social welfare provisions in education, health care, and pensions to encourage consumption and reduce saving. The second measure is to open the monopolized or highly restricted sectors to privately owned enterprises to exploit the productivity gains from competitive markets.

Keywords: China model; Entry barrier; Interest rate control; Monopoly; Overcapacity; Social welfare (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:prbchp:978-3-031-76658-9_13

Ordering information: This item can be ordered from
http://www.springer.com/9783031766589

DOI: 10.1007/978-3-031-76658-9_13

Access Statistics for this chapter

More chapters in Springer Proceedings in Business and Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().