China must to evolve its economic model to avoid the “middle income trap”, a condition where initial dashing success is replaced by low growth. This might become a possibility in the second half of this decade.
The 12^ 5-year plan –to end in 2015 — correctly targets domestic demand, hi-tech maufacturing, overseas direct investments, RMBinternationalization. The lack of real competition from other emerging countries should keep China exempt from shocks until 2015/2016 and China will also become the worlds’s largest importer and 4th largest consumer.
But there will not be time to celebrate, since hurdles will get higher and higher by 2016 forward. More internal consumption and an RMB de facto revaluation, will maketrade surplus shrink and capital less abundant. Chinese currency will become fully convertible and sudden exchange rate changes will be a norm. Drastic changes in production modes and industrial structure will be required.
China will shut down obsolete factories and nurture a new generation of pillar industries. Epoch-making long-term decisions regarding welfare, financial markets, labor relations, SOEs’ dividend policy, taxation and internal immigration must also be taken soon and the 5 years plan, just approved by the NPC, will soon be regarded simply as a bridge toward a more complex future.