Rebalancing China's Growth

China's rapid growth is facing macroeconomic, environmental and social challenges that have their origin in its pattern of growth. Using simulations with a CGE model this paper suggests that on current trends, current account surpluses, environmental stress and inequality are likely to remain a feature of China's growth. Alternative simulations if a policy package that reduces savings, better prices capital and environmental damage and allows for more labor movement is likely to produce better outcomes on all three counts. The exchange rate plays a minor role in this package, and an adjustment would mainly serve to limit expectations for an exchange rate appreciation and the accompanying foreign capital inflows.