A Discussion On The Formation Mechanism Of Development Trap

Since the twentieth century, many backward countries have experienced development stagnation which is different from developed countries (developed countries enjoy high technologies). This development stagnation called "development trap" and developed counties will not trapped into it.There were many foreign scholars’researches about development trap, but these researches were almost based on different nature of the structure and mode of the development. Explains from these perspectives obviously have made contribution to the awareness for the development trap. However, there were deficiencies. For example, these perspectives can not explain why two countries with structural difference and mode difference will all fall into the trap finally. Therefore the reason may include particularity and generality. Compared with the particular reason, the general reason plays a more important role, however, it is always neglected. This paper’s main task is to explore the general reason of "the development trap" with market mechanism as the core. Although a general explain may not fit an exact country, but it really have a significance.This paper is in the macro-enterprise budget perspective because market-economy is organized by enterprise which is an very active member. Profit is the life of enterprises; only create profit can enterprise live longer. And profit is related to cost and revenue. Here I must to emphasize that the enterprise in this paper is macro-enterprise. This paper also uses a macro economy model which has been simplified to help explain the reason of development trap is macro-enterprise balance deterioration.Because the final mechanism will be used to judge whether China will fall into the development trap, this paper chooses some countries in Southeast Asia and East Asia whose economic structure are similar to China. After an analysis on a few of economic data of some countries in Southeast Asia and East Asia, we found, before a backward country falls into the development trap, its per capita nominal GDP growth rate(US Dollars) will be bigger than its real per capita GDP growth rate(national currency). Actually, this phenomenon means the relative cost of the backward country is increasing and the relative competitiveness is declining in the international market. So the market share home and abroad decreasing because of other countries which enjoy cheaper cost; the rapid increasing per capita nominal GDP(US Dollars) lead to the highly demand for life quality and then a large amount of effective demand will transfer to the developed countries. In enterprise budget perspective, all above means increasing cost and decreasing income; in the macro view, all above means foreign trade deficit is increasing and foreign exchange reserves is decreasing. Then the backward country will fall into the development trap.Recent years, the Chinese macro data also shows its per capita nominal GDP growth rate (US Dollars) bigger than its real per capita GDP growth rate (national currency). On the other hand, with Chinese rising per capita revenue, domestic residents are increasing keen to the senior product produced by developed countries. The enterprise (macro-level) is facing the increasing cost and declining revenue. At the meantime, Chinese foreign trade deficit tend to increasing and foreign exchange reserves tend to decreasing. According to these, this paper concludes that China may at the door of development trap and cannot avoid it.