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China’s Economy Faces Three Constraints

Li Wei, head of the Development Research Center of the State Council (DRC), recently expressed the view that it will be "very difficult” for China to maintain a GDP growth rate of 6.5 percent in 2016 because the Chinese economy faces three constraints.
“The first is a tightened external demand from the global market. Since the 2008 financial crisis, although major economies have initiated a series of stimulus measures for economic recovery, … it will still take time to see a new round of high growth. The IMF lowered [its forecast] for the world’s economic growth in 2016 from 3.8 percent to 3.6 percent.
“The second is the kink in the population structure, which results in escalating labor costs. With an aging population and a rapid decline in the active labor force, the competitiveness of Chinese laborers has weakened.
“The last is the pressure on the environment and resources. For a long time, China’s arable lands have been decreasing due to industrialization and urbanization, directly threatening China’s food security. A development model that neglects the cost to the environment cannot last.”
The DRC is a ministerial level government policy research and consulting institution directly under the State Council.
Source: China Securities Journal, January 11, 2016