Title: 
Headings: China’s Economic Rise: History, Trends, Challenges, and Implications for the United States
China’s
 
Economic
 
Rise:
 
History,
 
Trends,
 
Challenges,
 
and
 
Implications
 
for
 
the
 
United
 
States
 

Updated
 
June
 
25,
 
2019
 

Congressional
 
Research
 
Service
 

Summary
 

China’s

The
 
History
 
of
 
China’s
 
Economic
 
Development
 

China’s
 
Economy
 
Prior
 
to
 
Reforms
 

The
 
Introduction
 
of
 
Economic
 
Reforms
 

China’s
 
Economic
 
Growth
 
and
 
Reforms:
 
1979-the
 
Present
 

Causes
 
of
 
China’s
 
Economic
 
Growth
 

Measuring
 
the
 
Size
 
of
 
China’s
 
Economy
 

The
 
Decline
 
and
 
Rise
 
of
 
China’s
 
Economy
 

Changes
 
in
 
China’s
 
Wage
 
and
 
Labor
 
Cost
 
Advantages
 

Foreign
 
Direct
 
Investment
 
(FDI)
 
in
 
China
 

Factors
 
Driving
 
China’s
 
FDI
 
Outflow
 
Strategy
 

China’s
 
Merchandise
 
Trade
 
Patterns
 

China’s
 
Major
 
Trading
 
Partners
 

Major
 
Chinese
 
Trade
 
Commodities
 

Percentage
 
of
 
2017/2016
 

Major
 
Long-Term
 
Challenges
 
Facing
 
the
 
Chinese
 
Economy
 

China’s
 
Incomplete
 
Transition
 
to
 
a
 
Market
 
Economy
 

Industrial
 
Policies
 
and
 
SOEs
 

China
 
and
 
Global
 
Steel
 
Overcapacity
  

A
 
State-Dominated
 
Banking
 
Sector,
 
Excess
 
Credit,
 
and
 
Growing
 
Debt
 

Environmental
 
Challenges
 

Corruption
 
and
 
the
 
Relative
 
Lack
 
of
 
the
 
Rule
 
of
 
Law
 

Demographic
 
Challenges
 

China’s
 
Hukou
 
System91
 

Economic
 
Goals
 
of
 
the
 
19th
 
Party
 
Congress
 
of
 
the
 
Communist
 
Party
 

China’s
 
Belt
 
and
 
Road
 
Initiative
  

Made
 
in
 
China
 
2025
 

Challenges
 
to
 
U.S.
 
Policy
 
of
 
China’s
 
Economic
 
Rise
 

Author
 
Information
 

Disclaimer
 


Content: China
 
has
 
become
 
the
 
world’s
 
largest
 
economy
 
(on
 
a
 
purchasing
 
power
 
parity
 
basis),
 
manufacturer,
 
merchandise
 
trader,
 
and
 
holder
 
of
 
foreign
 
exchange
 
reserves. This
 
in
 
turn
 
has
 
made
 
China
 
a
 
major
 
commercial
 
partner
 
of
 
the
 
United
 
States. China
 
is
 
the
 
largest
 
U.S.
 
merchandise
 
trading
 
partner,
 
biggest
 
source
 
of
 
imports,
 
and
 
third-largest
 
U.S.
 
export
 
market. China
 
is
 
also
 
the
 
largest
 
foreign
 
holder
 
of
 
U.S.
 
Treasury
 
securities,
 
which
 
help
 
fund
 
the
 
federal
 
debt
 
and
 
keep
 
U.S.
 
interest
 
rates
 
low. As
 
China’s
 
economy
 
has
 
matured,
 
its
 
real
 
GDP
 
growth
 
has
 
slowed
 
significantly,
 
from
 
14.2%
 
in
 
2007
 
to
 
6.6%
 
in
 
2018,
 
and
 
that
 
growth
 
is
 
projected
 
by
 
the
 
International
 
Monetary
 
Fund
 
(IMF)
 
to
 
fall
 
to
 
5.5%
 
by
 
2024. The
 
Chinese
 
government
 
has
 
embraced
 
slower
 
economic
 
growth,
 
referring
 
to
 
it
 
as
 
the
 
“new
 
normal”
 
and
 
acknowledging
 
the
 
need
 
for
 
China
 
to
 
embrace
 
a
 
new
 
growth
 
model
 
that
 
relies
 
less
 
on
 
fixed
 
investment
 
and
 
exporting,
 
and
 
more
 
on
 
private
 
consumption,
 
services,
 
and
 
innovation
 
to
 
drive
 
economic
 
growth. Such
 
reforms
 
are
 
needed
 
in
 
order
 
for
 
China
 
to
 
avoid
 
hitting
 
the
 
“middle-income
 
trap,”
 
when
 
countries
 
achieve
 
a
 
certain
 
economic
 
level
 
but
 
begin
 
to
 
experience
 
sharply
 
diminishing
 
economic
 
growth
 
rates
 
because
 
they
 
are
 
unable
 
to
 
adopt
 
new
 
sources
 
of
 
economic
 
growth,
 
such
 
as
 
innovation. The
 
Chinese
 
government
 
has
 
made
 
innovation
 
a
 
top
 
priority
 
in
 
its
 
economic
 
planning
 
through
 
a
 
number
 
of
 
high-profile
 
initiatives,
 
such
 
as
 
“Made
 
in
 
China
 
2025,”
 
a
 
plan
 
announced
 
in
 
2015
 
to
 
upgrade
 
and
 
modernize
 
China’s
 
manufacturing
 
in
 
10
 
key
 
sectors
 
through
 
extensive
 
government
 
assistance
 
in
 
order
 
to
 
make
 
China
 
a
 
major
 
global
 
player
 
in
 
these
 
sectors. However,
 
such
 
measures
 
have
 
increasingly
 
raised
 
concerns
 
that
 
China
 
intends
 
to
 
use
 
industrial
 
policies
 
to
 
decrease
 
the
 
country’s
 
reliance
 
on
 
foreign
 
technology
 
(including
 
by
 
locking
 
out
 
foreign
 
firms
 
in
 
China)
 
and
 
eventually
 
dominate
 
global
 
markets. In
 
2017,
 
the
 
Trump
 
Administration
 
launched
 
a
 
Section
 
301
 
investigation
 
of
 
China’s
 
innovation
 
and
 
intellectual
 
property
 
policies
 
deemed
 
harmful
 
to
 
U.S.
 
economic
 
interests.