The high economic growth was supported by an "aggressive but vulnerable system," with a large current account deficit and the firm-finance nexus tending to produce non-performing loans. It precipitated a crisis in 1972, but the government resolved it with an emergency decree. The government then launched a strong industrial policy backed by expansionary macroeconomic policy through the First Oil Shock, laying the ground for another crisis in 1979. The government carried out disinflation policy in the 1980s, and the high economic growth resumed, now with a lower inflation rate and a smaller current account deficit, culminating in a boom in 1986–1988. However, inflation and the current account deficit returned, though in a milder form. The country sustained the high economic growth by boosting construction investment, and then as facility and intellectual property investments increased to meet the emerging global boom. However, the non-performing loans and capital market openings made the economy vulnerable to crises.

Chapter Five delves into fuel switching in the context of market and law reform in China’s gas sector. With the objective of increasing natural gas supply and consumption, the reform of the gas sector in China has taken a significant step forward since December 2019, with the establishment of an independent pipeline operator (i.e. PipeChina) and the promulgation of essential regulations on tariffs and third-party access. This chapter discusses the overall regulatory governance of China’s gas sector, assessing the extent to which market reform and newly promulgated regulations can drive the desired outcomes of increasing natural gas supply and consumption to accelerate fuel switching.

Inequality of market income rose after the 1997 crisis and then leveled off while the government redistribution increased over the years; however, the transfer to the rich through the real estate market increased immediately before the crisis. The inequality of market income rose after the crisis as the massive layoff of workers and the slowdown of growth led to job shortages and as labor market dualism deepened between large enterprises’ and small and medium-sized enterprises’ workers and regular and non-regular workers. Inequality also widened as the labor share of income fell, though the rising share of capital income was retained within firms rather than distributed to households. Unions have often failed to represent the interests of the whole working class. Welfare expenditure has risen substantially to narrow the inequality of disposable income; however, the welfare system has problems of coverage and sustainability, which are aggravated by the population's aging.

Chapter Nine analyses the regulations related to carbon capture and storage (CCS) in China, given its indispensable role in achieving the carbon neutrality target. It starts by elaborating on the essential components of CCS regulation, particularly risk allocation, to provide an analytical framework against which the Chinese regulatory framework for CCS is assessed. This chapter examines the current design of the legal and regulatory systems, identifies the regulatory gaps and uncertainties that hinder the implementation of CCS, and discusses the measures needed to address these gaps and uncertainties. It also explores the legal and regulatory implications of using CO2 as a resource, which has the potential to enhance the commercial viability of CCS and promote the development of the CO2 industry.