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Although China has taken positive steps to address the debt burdens of local governments, it remains to be seen how it will repay that debt. Meanwhile, the increase in international trade denominated in RMB is likely being driven largely by speculative demand.
In order to reconcile the current dominance of coal in China with the country's carbon reduction goals, Beijing has expressed interest in carbon capture and storage technologies, which are still in a nascent stage of development.
Inflation poses a particularly significant challenge to China's leadership, since it can both incite broad-based dissatisfaction among diverse social groups and create fissures among the ruling elite.
China’s economic growth model, which relies on low interest rates to stimulate investment, resembles that of a large development bank. However, China's weak fiscal system threatens the sustainability of this model.
In spite of nominal changes in the value of China’s currency and domestic interest rates and wages, China’s economy remains unbalanced, as real interest rates continue to outpace real wages and any real appreciation of the renminbi.
As China becomes an increasingly motorized country, Beijing must enact new policies to address the challenges presented by congestion, pollution, and fuel dependence.
China must not only reform its income tax system, but also enact policies to increase labor wages, redistribute wealth, and fight corruption if it is to significantly reduce income inequality.
By relying on low-interest loans to catalyze economic growth, China’s growth model resembles that of a huge development bank. While this approach has been successful so far, it remains to be seen whether it can be sustained.
When popular protests occur in China, Beijing’s official response is shaped by a number of factors, including the level of organization of the protesters, the media coverage the protests receive, the demands the protesters make, and the location of the protests.
While China’s new aircraft carrier does not pose a major threat to U.S. forces or allies in the Western Pacific, the United States needs to take steps to communicate this message of reassurance to countries in the region.