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The Chinese economy is currently undergoing fundamental changes. In this context, the 2022 China Update examines the key characteristics of China's transition towards a new phase of economic growth and development. This year's update book covers a range of diverse topics that reflect the complex and changing nature of the economy. It explores critical questions: Why does China need a new development paradigm, and what is the best way to achieve it? What are China's choices when faced with the restructuring of global industrial value chains? What key roles will domestic consumption play in the next phase of China's development? What does the digital transformation mean for the Chinese economy? What has been the domestic impact of the Covid-19 pandemic on income inequality and labour market outcomes? What pathways exist for China in its transition towards carbon neutrality? How does China's emissions-trading market compare with that of Europe? How will China's carbon neutrality strategy affect the Australian economy? What are the political factors influencing bilateral trade flows between China and its trading partners? And what is at stake for China–US relations?

1. Challenges and roadmaps for moving towards a high‑income economy / Ligang Song and Yixiao Zhou -- 2. Tackling social challenges to avoid the middle-income trap / Cai Fang and Jia Peng -- 3. China's agricultural trade: A global comparative advantage perspective / Rao Sihang, Liu Xingshuo and Sheng Yu -- 4. China's urbanisation in the new technological revolution / Wang Wei, Deng Yusong, Shao Ting, Wang Ruimin, Niu Sanyuan and Liu Xin -- 5. Revenue-neutral tax reform in China / Yanchao Xu and Shawn Xiaoguang Chen -- 6. Innovation and its growth effects in China / Sizhong Sun -- 7. Conditions in China's corporate sector / Joel Bowman -- 8. The transformation and upgrading of processing trade and its impact on firms' productivity / Kunwang Li and Haoran Hu -- 9. The renminbi's status as a safe‑haven currency / Liqing Zhang, Libo Yin and You Wu.

With its per capita income surpassing US10,000, China has now drawn up ambitious plans to further lift its income to the level of developed countries. Yet various constraints need to be overcome if China is to build on the achievements of the last 40 years and further boost its growth potential.

With its per capita income surpassing US$10,000, China has now drawn up ambitious plans to further lift its income to the level of developed countries. Yet various constraints need to be overcome if China is to build on the achievements of the last 40 years and further boost its growth potential. Besides these constraints, the year 2020 saw human societies hit heavily by the COVID-19 pandemic and the global economy caught off guard and dipped into recessions caused by lockdown measures for controlling the spread of the pandemic. Nations around the world have experienced grave loss of human life and lockdown measures have knocked economies from their normal growth trajectories. Even as the pandemic continues to unfold, all signs point to China as being the first major economy to have emerged out of the crisis. But many questions remain. Has the Chinese economy emerged from the pandemic crisis relatively unscathed? What are the long-term prospects for its economy? This year's Update book, China's Challenges in Moving towards a High-income Economy, explores the challenges faced by the Chinese economy in the transition towards a high-income economy, including agricultural development, finance and fiscal system reform, RMB internationalisation, trends in urbanisation, as well as topics related to innovation, corporate sector development and market competition. China's growth experience has been full of exciting changes and important lessons for reform and structural changes, and this year's China Update is again the way to gain insights into these.

AbstractThe Australian economy has benefited from several decades of extraordinary Chinese expansion. Slowing growth has diminished these gains and geopolitics between China and western democracies has seen restricted commerce between China and Australia. We use a global economic model to assess the consequences were these tensions to restrict all associated commerce, yielding an Australian real GDP contraction of 6 per cent. A 'bamboo curtain', restricting all commerce between western democracies and all other regions, would see massive global losses, with Australia's economic welfare impaired most, while some short‐run relief could stem from small‐country monetary 'free riding'.

AbstractDeclines in low‐skill labour shares are reviewed, and a stylised model is constructed to examine their determinants and future implications. A retrospective analysis of US shocks suggests that technological change has contributed more to raising income inequality and the wealth to GDP ratio than other changes. An anticipated future twist away from low‐skill labour toward the capital, combined with population growth, risks high unemployment rates. Productivity growth at twice the pace since 1990 limits this, though inequality persists. Analysis shows that a generalisation of the US 'earned income tax credit' system with consumption tax outperforms alternatives of the 'universal basic income'.