A quick implementation of supply-side reforms would provide the necessary institutional and policy environment for China to shift from the rapid growth of the past to medium-speed expansion with a greater focus on the quality of its development. The main area of these supply-side reforms lies in applying market-based principles that can more efficiently channel resources and improve factor productivity.

China has seen important changes in its economic structure and growth momentum since it entered the period that is commonly referred to as a "new normal." There has been much discussion of whether China's economy will have a so-called hard landing and sink into the "middle income trap" as its growth rate continues a decline that has already lasted six years. What are the prospects for growth in the short-term and over the long-term? An analysis with a long-term framework - and benefiting from international comparisons - would help guide us in addressing these questions.

China will not fall into the Latin American style middle income trap. Since the end of World War II,dozens of economies have become industrialized,but their success in development has been limited. Among these industrialized states,only thirteen graduated to high-income societies. Two different types of declines in economic growth can be observed.

The first kind is the decline that occurred after average per capita income reached less than 7,000 international currency units (an average unit for purchasing power comparisons) just after a period of high-speed growth. In these cases,the economy sank into stagnation and in some cases slipped backwards. These economies generally relied on import substitution as their strategy to curb market development,resulting in heavy foreign borrowings and a serious polarization of society. Some countries were swept up in waves of nationalism and were unable to pay for their high welfare costs. This ultimately put a halt to high growth and led to a slide into the middle income trap. Some Latin-American countries were typical of this kind of stagnation.