China: Quo Vadis? Economic Transformation and Future Challenges

Wagner provides a compact overview of the development of the Chinese economy since the inauguration of reforms in 1978. Central to his analysis is the proposition that Chinese policymakers face a “trilemma.” They have three goals—promoting economic growth, maintaining public order and social stability, and preserving one-party rule—but can achieve only two simultaneously. The author argues that Chinese leaders will not choose to sacrifice either public order or one-party control, which means that they may undercut economic growth when they clamp down on entrepreneurship and competition for political reasons. As positive routes forward, Wagner points to the country’s “dual circulation” strategy, which seeks to boost domestic consumption alongside exports, and state-directed industrial policy geared toward promoting high-tech innovation and self-sufficiency. He concludes, somewhat hopefully, that these efforts may allow China to solve its trilemma.