By  on March 21, 2006

WASHINGTON — China's economy has been growing by leaps and bounds, but faces serious structural and social issues that could stunt further expansion.

The country's prowess in manufacturing, including apparel and textiles production, helped spur 9.9 percent growth in its gross domestic product last year, but has also created huge environmental problems and a massive shift of people from the countryside to the cities.

The U.S. has a solid middle class, the rule of law and a stable democratic government, but China's 1.3 billion people live under an authoritarian regime that is struggling to control the country and create a more market-based economy.

"There are many governments in China and the central government's not necessarily in control," said Marshall Meyer, professor of management at the Wharton School of the University of Pennsylvania. "The central government depends on local governments for their revenue and can't really control them as effectively as they'd like. It's like Elizabethan England; you've got a crown and you've got a nobility, and nothing gets done unless they agree."

If China is going to continue to develop and become not only a manufacturing powerhouse, but a consuming one as well, much needs to be done and the government will have to guide the process.

Development has raised the living standards in eastern coastal cities, but the rural areas lag behind. The rich-poor, rural-urban divide no doubt contributed to the reportedly 87,000 instances of social unrest in the country last year. China has been on an economic growth spurt since the late Eighties, and it is unclear what impact slowdown in growth would have on the social dynamic.

China's leaders are well aware, however, of the volcano they sit atop.

"China remains the biggest developing country in the world that features a huge population, weak economic basis, uneven development and heavy environmental pressure, and its people's living standards are still not so high," said Chinese President Hu Jintao at a G20 Finance Ministers and Central Bank Governors meeting in Beijing last year. "Hence, modernization in China remains a long and uphill journey that will entail many years of hard work."

The country, which organizes its development efforts around five-year plans, has set out on a more balanced approach for the 2006 to 2010 period. The plan calls for a "scientific approach to development" and "constructing a harmonious socialist society" that pays closer attention to humanity, society and the environment.

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