Research On Problem Of China's Middle-income Trap In Case Of The New Normal

Since 1980s, China as one of the most vibrant country in East Asia has developed rapidly, with an average annual GDP growth rate of close to 10%, essentially has enhanced the national power and its citizens' living standard, and has changed its position in the global economy. However, the long-term imbalanced development has brought negative influence. While the global economy has recovered with a slow speed since the global financial crisis in 2008, China has bid its farewell to the two digit growth, entering a downward interval. In 2014, for the first time, Chinese government described the current economic difficulties with the key words "New Normal".In 2015, the annual GDP of China was 67.67 trillion yuan, and the economic growth rate was 6.9%; GDP per capita reached 52 thousand yuan (calculated by population of 1.3 billion), which was equivalent to US$ 8,016 approximately. According to international standard, China has become one of the countries with middle and high income. However, from the international experience, when a country's national income reached the middle level, the country was likely to face the so-called Middle-income Trap dilemma such as Brazil, Chile, and Venezuela in Latin America, Philippines, Malaysia and other countries in Southeast Asia. Although China, a large country with a population of 1.3 billion and GDP of more than 60 trillion yuan, has made great achievement in economic and social development since the reform and opening-up policies were introduced, there is not practical experience of dealing with the problem of the Middle-income Trap that can be learnt from. The problems caused by the early economic development such as excess capacity, shrinking demand, and the growing gap between the rich and the poor, and the constraints such as the loss of demographic dividend and deterioration of the natural environment have seriously restricted China from approaching to high national-income country. In the circumstance of the "New Normal", it is worth of careful consideration on how to solve China's problems in economic and social development, how to break out of the middle-income trap, how to prevent the above problems from spreading, and how to enhance reform and opening-up policies. Especially, in the process of building a well-off society and realizing the great rejuvenation of the Chinese nation, these issues deserve more attention in the whole society.Based on above analysis, this article along the main line of "understanding the new normal, grasp the new normal, leading the new normal", crossing the middle-income trap in our country under the new normal question has carried on the system research. The paper comprises seven sections:the first part includes research background, significance, research methods and perspectives. The second part reviewed and commented later relevant domestic and foreign literature. In this part, those aspects of cognition and the standard of the middle-income trap are summarized, alone with the factors could influence. The third part is the theoretical basis of this study, including the economic understanding of the New Normal in China, the theory of the middle-income trap and the theoretical relationship between them. The fourth part, namely chapter four, from the qualitative point of view, emphatically analyzes the influence factors and mechanisms of the New Norm across the middle-income trap, including the current status of China's new economic normal operation, the decline in economic growth, the demographic transition, the adjustment of industrial structure, income distribution and expanding domestic demand. The fifth part is the empirical analysis by means of qualitative analysis on the five-year panel data of 31 provinces and autonomous regions, and come to empirical conclusions. The sixth part, mainly focuses on the international cases of the "Middle-income Trap", selecting successful cases including the United Kingdom, the United States, Germany, and Japan, as well as failure cases in Latin America, Southeast Asia, and Eastern Europe, and discussing how to break out of the middle-income trap from both positive and negative aspects. The seventh part combined with the analysis of the present research, put forward on breaking out of the middle-income trap in China and achieving sustainable economic development on the former research, including improving labor population proportion, improve the quality of human capital; Balancing investment and consumption, maintain economic growth in domestic demand endogenous power; To speed up the industrial adjustment, stimulate vitality industry; Increase the intensity of r&d investment and technological innovation, promote the effective transformation of scientific and technological achievements; To perfect the income distribution policy, household income growth, etc..The main conclusion of this paper includes the following points:(1) in the middle-income stage, there is an obvious difference in growth rate of GDP per capita between countries of falling into the trap and countries of crossing the trap. Specifically, 6% of growth rate for the former and 1%-4% for the latter. (2) According to statistics in China, the decreasing natural increase rate of population is beneficial for crossing the middle-income trap. There is a positive correlation between the proportion of labor force and per capita income, and the proportion of working population is positively correlated with per capita income (3) The speed of economic growth has direct impact on crossing middle-income trap. Maintaining a reasonable level of economic growth is the guarantee of crossing the middle-income trap successfully. (4) Consumer demand and adjustment of industrial structure has significant positive effect on growth of per capita income. (5) The increased level of urbanization leads to positive effect on chances of crossing the middle-income trap.