A Historical Investigation Of The Middle-income Trap And A Study Of China's Cross-path

Economic growth is an important issue in economic research.In recent years,the middle-income trap has become a hot topic in academic circles.As the world's seco nd-largest economy and the largest developing country,China has have attracted a hig h degree of concern from all walks of life about whether the country will fall into the middle-income trap due to the declining growth at upper middle-income stage.Howev er,the existing research has not given definite answer answers to either which econ omies have fallen into the trap and which ones have successfully stridden across or t he the trap.what's more,the definition of the middle-income trap and the exact lasting time of it are also unclear.The existing literature includes some summarie s of the experience from the economies that have stridden across the trap and the lesso ns from those fallen into,but the summaries are not systematic enough,and some lac k empirical evidence for comparative study.Facing the challenge of the middle-inco me trap,how to choose the development path is a realistic issue for China.Based on the classification of the income-level by the World Bank Group since 1987 a nd reviewing development history of the theories generated since the concept o f middle-income-trap had been first mentioned in 2007,This paper attempts to ans wer these questions hereof.Through the comparative analysis made in this paper based on the national classi fication standards of the World Bank and the converted data of GDP per capita,I have found that the countries and regions with GDP per capita between US $ 718-10,820 a re defined as middle-income economies,and an economy is regarded as having fallen into the middle-income trap when it remains at this stage for an interval of more than 30 years.From 1960 to 2015,46 economies in the world had fallen into the middle-in come trap,and 23 stridden across.I have selected 21 economies fallen to the trap and 4 successfully stridden across to make comparative study,and found that the economi es fallen into the trap lag behind the ones stridden across in all main indicators at the middle-income stage,such as per capita growth rate and capital-labor ratio and capital-output ratio,human capital level,labor productivity,total factor productivity,and the fairness of income distribution.Economic slowdown is the proximate cause for Latin American countries and so me other countries to fall into the middle-income trap,and economic development stra tegic mistakes,industrial structure imbalance,excessive urbanization,extreme disparit y between the rich and the poor,and the welfare catch-up driven by populism are the main causes.While many factors have contributed to the successful striding across the trap such as the smooth upgrading to the advanced industrial structure,the transforma tion of economic growth from investment driven to consumption driven,the steady in crease of income and expansion of middle-income class,the improvement in human c apital resulted from the great importance attached to education,the encouragement of scientific and technological innovation and the proper formulation of government eco nomic policy,which domestically insists on market economic system and furthers ind ustrialization,externally pursues an open,export-oriented strategy,and generally mai ntains a stable macro-economic and political environment,and lower degree of inequality.The study in this paper shows that the average GDP growth rate for successfully crossing the lower middle-income trap is 5.4%,and for crossing the upper middle-inc ome trap is 3.67%.The average GDP growth rate for successfully crossing the upper middle-income trap is generally less than that for crossing the lower middle-income tr ap,which tallies with our theoretical basis and actual national conditions.To stride acr oss the middle-income stage within 30 years,the average annual GDP growth rate is required to be over 2.33%.China must complete the stride before 2028,which require s the average annual GDP growth rate from 2010 to 2028 to be at least 5.8%.If the pe rformance in 2015 can be taken as a start point and the pace of development in 2015 ca n be maintained,China will be able to stride across the middle-income stage around 2023.The per capita growth rate,investment share and human capital level of China ar e higher than the economies that have stridden across the trap since China stepped int o middle-income stage in 1999.However,China's higher output-input ratio and the po or investment efficiency that is even lower than the economies that have fallen into th e trap,and the technical inefficiency and diseconomy of scale have stunted its GDP gr owth rate,and Chinese economic development faces challenges.Although China step ped into upper middle-income stage in 2011,such causes increase the risks for China t o fall into the middle-income trap such as the constraints of domestic and foreign development patterns,the decreased proportion of working-age population,the showdown of potential growth rate and economic growth,and excessive production capacity.Therefore,the ideal way for China to stride across the middle-income trap is to e xpand domestic demand to absorb excess production capacity,improve investment eff iciency to maintain capital deepening speed,and accelerate supply-side structural refo rm to promote industrial transformation and upgrading.At the same time,there are ne eds to deepen the reform and explore the new kinetic energy from institutional innovat ion rather than technological progress,offer uncapped positive incentives for the effe ctive market competition under the guidance and protection of property rights,and co mbine with the minimum-guaranteed two-wheel driven accurate poverty alleviation.I n addition,efforts should be made to reform the income distribution system to narrow the gap between the rich and the poor,adhere to the principle of taking education as th e fundamental task crucial for generations to come,insist on opening up,and pay clos e attention to energy security and environmental protection.The multidimensional and comprehensive approaches are helpful for China to successfully stride across the mid dle-income trap.