China's Economic Transition Syndrome

Following 30 years of high economic growth, China's economy is in the midst of a classic transition from an industrial to a post-industrial economy. In this transition period, the mismatch between supply and demand is growing, while the country's economic growth engine is weakening. Stimulus policies have aimed to maintain the country's economic growth momentum but they have come at the price of sharply increased financial fragility and resource misallocation, both of which are harmful to economic growth. China's “economic transition syndrome” refers to the vicious cycle of slowing GDP growth, combined with increasing demand for stimulus policies, and increasing financial fragility and resource misallocation.