The Transition of China’s Development Model

From 1978 to 2010, China has achieved a continuous high economic growth under controllable inflation pressure. During the 33 years, the average GDP growth was 10.0%, and the average CPI growth was 5.4%.1 The sustained economic growth enabled China to become the second largest economy in the world in 2010. However, the success in the past naturally cannot guarantee success in the future. The old development model of China is more and more unsustainable under current circumstances, especially after the burst of the global financial crisis. If the Chinese economy cannot change its development model appropriately in time, the fast economic growth in China might come to a halt, and the process of reform and opening up might suffer a reverse. This paper argues why and how China should change its development model. The paper is structured as follows: The first and second parts analyse the features and consequences of China’s old development model. The third and fourth parts discuss why and how China should change its development model.