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What are the major challenges, fault lines, and potential adversities (these terms are used synonymously), that China's economic development will encounter over the next decade? How severely will China's overall economic performance be affected if these adversities occur separately or in clusters? This book addresses these key questions. China has confronted in the past two decades five of the eight fault lines that the authors consider (unemployment, corruption, water resources, HIV/AIDS, and financial fragility), and, nonetheless, it has sustained high rates of economic growth. Therefore, in assessing the potential effects of these fault lines on China's future economic performance, the authors focus on whether, why, and by how much their intensities may increase — that is, on changes, rather than on the prevailing levels of each fault line. For the other three fault lines examined, which have not previously occurred or recurred — oil price shocks, foreign-direct-investment shrinkage, and serious military conflicts-the authors consider the circumstances under which they might arise and their resulting economic effects.

Table of Contents

  • Summary

  • Preface

    All Prefatory Materials

  • Chapter One

    Potential Adversities Confronting China's Continued Economic Growth

  • Part I

    China's Institutional and Structural Fault Lines

  • Chapter Two

    Massive Unemployment and Rural Poverty

  • Chapter Three

    Economic Effects of Corruption

  • Part II

    Sectoral Fault Lines

  • Chapter Four

    Epidemic Disease: A Wild Card in China's Economic Future?

  • Chapter Five

    Water Resources and Pollution

  • Chapter Six

    GDP Effects of an Energy Price Shock

  • Part III

    Financial Fault Lines

  • Chapter Seven

    China's Fragile Financial System and the State-Owned Enterprises

  • Chapter Eight

    Possible Shrinkage of Foreign Capital Inflows

  • Part IV

    Security Fault Lines

  • Chapter Nine

    Taiwan and Other Potential Conflicts

  • Chapter Ten

    Conclusions: Fault Lines in China's Economic Terrain

  • Supplemental

    Supplementary Materials

The research described in this report was sponsored jointly by the Office of Net Assessment in the Department of Defense and the Smith Richardson Foundation. The research was conducted in RAND's National Defense Research Institute, a federally funded research and development center.

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