Sat, April 28, 2012
China > Mainland

How China could avoid "middle-income trap"

2012-04-28 06:49:57 GMT2012-04-28 14:49:57(Beijing Time)

By Li Hongmei, Sina English

Studying the "middle-income trap" will allow us to gain a penetrating insight into why economies are particularly susceptible to slower economic growth and the emergence of political, economic and social problems after entering the middle-income stage of development. And we will accordingly formulate our own path, ensuring a smooth progress whilst steering clear of the pitfalls.

Although external conditions are important, it is internal factors that play the decisive role in surmounting the middle-income trap. In appearance, the majority of countries still caught within the middle-income stage are found in Latin America, Southeast Asia and Eastern Europe.

None of these countries are allies of developed Western countries, and some have even been engaged in a state of long-term hostility with the West, suffering at the hands of Western interference and even sabotage. None have entered the ranks of high-income nations. However, there are other economies, such as the Republic of Korea and Taiwan, who are close allies of Western countries, and all are located on the “frontlines.” As their development accords to the interests of Western countries, they have received major support from the West. Many of the technologies and products of Western countries are open to them, although the provision of the same is restricted to other economics.

Therefore, these economies have found it much easier to accomplish the leap from the middle-income stage to the high-income stage. That notwithstanding, profound internal factors are the essence of why economies fall into the middle-income trap, and these may include institutional problems or major policy mistakes.

We must give emphasis to both international and domestic initiatives in order to prevent China from falling into the middle-income trap. From an external perspective, given that China is a major country, its entry into the high-income stage is sure to have a huge influence on the global landscape. Some countries are unwilling to see such changes, and will do their utmost to contain and restrict China’s development, and lure us into the middle-income trap.

In view of this, other than striving to secure a more favorable external environment through such means as diplomacy, the focus of our efforts must be devoted to domestic factors.

China is a populous country whose overall level of education and quality of labor are not yet high, which means that repetitive labor will continue to be our major characteristic for a considerably long period of time.

Setting out to change this situation, the CPC and the central government have formulated sound strategies for long-term development, but it will take time for the effects to become apparent.

In addition, during the course of economic and social development, we must ensure that policies and directives are formulated and adjusted in line with the requirements of avoiding the middle-income trap. This is the main issue confronting us. We should lay particular emphasis on strengthening coordination in the formulation of economic policies and public policies.


Also, we need to grasp the main issues in our consideration of domestic factors. Firstly, we must be guided by the correct theory in order to correctly understand our development stage and the essential features of our economy. Secondly, we must identify the key aspects of our initiatives. In regard to the economy, the most important aspects will be international trade, investment, income distribution, social safety nets and consumption, as all of these things will have a bearing on whether or not we can avoid the middle-income trap. Thirdly, we must coordinate our policy-making in these areas and consciously avoid the middle-income trap. Fourthly, through initiatives in publicity and education, we must ensure that our people are aware of China’s basic national conditions and prevent them from having unrealistic expectations.


(Originally appeared in Qiushi Journal, Chinese edition )



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