Structural change, rebalancing, and the danger of a middle-income trap in China

China is currently experiencing a structural change toward tertiarization and an implied growth slowdown associated with it. The paper investigates whether this growth slowdown is merely cyclical or a negative trend, and further what China is doing or should do to avoid falling into a ``middle-income trap,'' a problem many emerging economies have experienced in recent decades. The pitfalls of the current ``soft'' rebalancing policy in China are analyzed in the context of this development.