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High-income country
Published on: 2017-09-26
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033China will avoid the middle income trap and become a high-income country.
 

The blue tone that China could get caught in the “middle income trap” has been speculated since the country’s economic growth slowed in 2012.


In 2016, the GDP per capita of China reached $8,000, a figure much higher than the threshold value of medium-high income countries. But there is still a gap between China and high-income countries.


Now the country is at a key stage to proceed into high-income territory, and recognizing the essence of the “middle income trap” and the prospect of the Chinese economy is of great significance.

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The concept of the “middle income trap” was first put forward by the World Bank in 2006. It said that middle-income countries tend to have slower economic growth than both poorer and richer economies.


However, the concept is more of a statistical phenomenon than a reality, as it is mainly caused by increasing labor costs and insufficient innovation when an economy becomes a middle-income country.

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Only 13 out of the 101 middle income countries and regions have become high-income economies from 1960 to 2008. That is a major part of the argument that says China will be caught in the trap too.


However, such statistics are not convincing, because not all of the middle-income economies failed to evolve into high-income countries.

031China has not only kept a leading economic growth, but also maintained the health and stability of its economy. It is obviously at an opposite pole of the stalled development described by the middle income trap.


Cross-country comparison and econometrics show that a 4% growth is enough for China to evolve into a high-economy country, and China’s growth is way above that mark.


China has kept its growth between 6.7% and 6.9% for eight quarters. Researchers believe that the country is able to maintain its growth rate above 6% for the next decade.

032According to international comparative studies, a stable government, market-oriented economic policies, high-quality human capital, openness, and social stability are the essential conditions for a middle-income country to evolve into a high-income one. China possesses all of them.


There is no doubt that China will eventually become a high-income country, and when should be the topic that deserves all of the attention.

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