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Research Article | Open Access
Volume 8 | Issue 1 | Year 2021 | Article Id. IJEMS-V8I1P114 | DOI : https://doi.org/10.14445/23939125/IJEMS-V8I1P114

“Mid-income Trap”: A Real Problem in Front of China Judgment and Understanding of China’s Current Economic Development Based on Global Data 1962-2017

JIA Kang

Citation :

JIA Kang, "“Mid-income Trap”: A Real Problem in Front of China Judgment and Understanding of China’s Current Economic Development Based on Global Data 1962-2017," International Journal of Economics and Management Studies, vol. 8, no. 1, pp. 131-154, 2021. Crossref, https://doi.org/10.14445/23939125/IJEMS-V8I1P114

Abstract

To China, which is in its tough transition and seeking to rise in a peaceful development, the concept of “mid-income trap” based on global statistical phenomena is a real top-level problem related to the realization of “the Chinese dream.” Faced with the “mid-income trap,” some important understandings need to be grasped with analysis and discussion. First, the mid-income stage is a relative development stage definitely cannot be confounded with “trap,” but the correlation between the two words is also nonnegligible. Second, according to the World Bank’s classification of the income groups of economies around the world, the “mid-income trap” can be divided into “lower-middle-income trap” and “upper-middle-income trap.” Based on time-sectioned data of 1960 and 2008, the World Bank research team believes that only 13 economies have successfully upgraded to the high-income ranks; however, we notice that although the economic development of a few economies that have successfully crossed the “mid-income trap” have their characteristics, the land area and economic volume of which are relatively small in general. Third, based on World Bank’s database, with the average GNI per capita of the world be the independent variable and the annual income division standard be the dependent variable, we use the income division standard from 2000 to 2012 to obtain the estimated value of the income division standard from 1962 to 1999, to realize the further analysis of the development path of the successful economies. The conclusions are: In terms of incomplete intervals, the average GDP growth rate of successful economies crossing the “lower-middle-income trap” is at least 8.50%, and the average duration of the successful economies crossing the “upper-middle-income trap” is 15.9 years, during which the average GDP growth rate is 5.08%. The duration of China’s crossing of the “lower-middle-income trap” is 14 years, and the average GDP growth rate is 9.87%. Since China upgraded to the upper-middle-income stage in 2010, it has been facing a severe test of crossing the upper-middle-income stage. The successful economies have an average duration of 28.15 years in the “upper-middle-income trap” with an average GDP growth rate of 3.10%. In the perspective of the range of average GDP growth rate, the highest point appears at 5.67% (Malaysia); in the process of crossing “lower-middle-income trap” and “higher middle-income trap,” there are many repetitions of “Promotion-Exit-Re-promotion”; economies that fall into “mid-income trap” represented by Latin America can give China’s economic development a very important lesson, which is to try to avoid the unsustainability brought about by the welfare catch-up based on populism. At last, facing the real problem of “mid-income trap,” we must pay special attention to avoid the distortion of economic catch-up development path by the welfare catch-up based on populism; China’s economic upgrading and development at this stage are still facing the factors of the era and the
JIA Kang / IJEMS, 8(1), 131-154, 2021
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fundamental realities of the country that cannot be ignored. The “urgent pressure” of upgrading caused by the accelerated industrial revolution, the restraint of the first-mover economies in the global economic development pattern, the specific energy resources and ecological environment constraints, the demographic and educational structure challenges, the cultural and ideological influences, and especially, the success or failure of critical institutional reform explorations, are all major practical issues for China to escape from the “mid-income trap” in the process of economic catch-up.
Since the “mid-income trap” was put forward by the World Bank in the report East Asian Visions: Perspectives on Economic Development in 2006, there have been many related discussions. It has become a hot spot and caused a stir in China’s recent divergent opinions and conflicts of thought. Although this concept's formulation has some elasticity and ambiguity in the form and quantitative boundary, it is by no means a pseudo-problem that some claimed. As a statistical phenomenon, it is indeed a real problem in the real world. It should be further emphasized that for China, which is in its tough transition and seeking to rise in a peaceful development, “mid-income trap” is a real top-level problem related to realizing the Chinese dream. From a historical perspective, an international perspective, a practical economic development perspective, or an economic theory perspective, this challenging and testable problem is inevitable. This article tries to carry out analysis, investigation, and discussion.

Keywords

Mid-income Trap；Economic Development

References

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