The Rise and Fall of China's Economic Miracle

After several decades of unprecedented growth that turned China into the world's second largest economy, today China is facing major economic challenges, exacerbated by rising tariffs imposed by its most important export market, the United States. How can we explain the extraordinary rise and sudden faltering of China's economic miracle?

Kent Deng takes a long-term view, charting the development of China's economy from the fourteenth century to the present day. He shows the level of growth reached by China's traditional economy and compares this with the economic performance during Mao's rule from the 1950s to the 1970s, a period that fell into a growth cul-de-sac with major economic disincentives and mass poverty. This forced Mao's successor, Deng Xiaoping, to reform and open up China's economy by unleashing the economic power of the market. The new model developed by Deng Xiaoping was driven by state-led import dependency in order to catch up with the West. Exports were a means to that end. But this economic model is now facing increasing resistance from those countries on which China has relied for its growth. Since 2010, two doors have been closing on China: the door for goods heading for China (vital for China's modernization) and the door for goods coming from China (vital for paying for China's imports).

Given the headwinds China now faces, and given that many low-income countries have now modelled themselves on China and begun to supply the world market with low-priced goods, Kent Deng argues that China would need an economic miracle to bounce back to its pre-2010 growth trajectory.