How China Across Middle-income Trap

According to the definition made by Asian Development Bank of World Bank, Countries whose GDP per capita is lower than 900 dollars are classified as"Low-income Country"; countries with GDP per capita ranging from 900 to 3500 dollars as"low middle-income countries"; and those with GDP capita spanning from 3500 to 11000 dollars as"high middle-income countries". With our national per capita income surmounting 3700 dollars, China has squeezed into the ranks of high middle-income countries. History has testified that, the upcoming stage marks the crucial stage for China to enter into the queue of high-income countries. Moreover, improper handling may land China into medium-sized income trap.By analyzing the potential causes for"medium-sized income trap", the present thesis argues that the so-called"trap"is simply caused by chronic societal and economic conflicts resulting from the problems inherent in the economic development. Our country can storm out this"medium-sized income trap"by properly handling these conflicts and with the guidance of industrial policy of our government. To be specific, these problems include: problem of state-owned enterprises themselves,"financial repression"in the development of small and medium enterprises and upgrading industrial structure. As the afore-said problems often mingle together, interconnecting with and affecting each other, improper handling of any of them may inhibit solving another problem. What's worse, if these problems can not be cleared up for a long period of time, conflicts in the course of development can be exacerbated, for instance, pertaining problems in urbanization caused by excessively high unemployment rate, increasingly widening of the gap between rich and poor and the growing bad debt risk in the bank industry and et cetera. All of these could sink China into the"medium-sized income trap".Therefore, the present paper first analyzes the problems inherent in our existing state-owned enterprises and its relationship with the latent"trap"confronting our economic development from the perspective of ownership as well as the relationship between principal and agent through studying the administration structure of state-owned enterprises. It also points out that strengthening the reform of state-owned enterprises shall play an important role for China to leap over the"medium-sized income trap". Moreover, based on our national status quo, the paper demonstrates the justification to progressively strengthen the reform of state-owned enterprises and the momentum for doing so. Secondly, the present paper also studies the causes for the problem of"difficulty in financing"faced with our domestic small and medium enterprises in the course of economic development nationwide from the perspective of economics of information and furnishes corresponding countermeasures to settle it. Lastly, the final part first explores the huge contribution of industrial restructuring to national technological progress, then highlights the severer problems of market failure in boosting industrial upgrading relying by the market in developing courtiers. In a result, the paper suggests that our government to play a positive role in guiding the industrial restructuring by stipulating industrial policies so as to prompt the upgrading of industrial structure and technological advancement, thereby invigorating national economic growth.