The "Middle-income Trap" And Research On The Income Distribution System Reform Of China

In the East Asian economic development report of2006, the World Bankproposed the “Middle-income Trap”, and since the advent of the concept, people’sconcern about it never stop.China has entered the middle-income stage fromlow-income stage in2001, in the year of2010, China from a lower-middle-incomestage rise to a high middle-income stage. Historical experience shows thatmiddle-income is full of problems and difficulties. After entering the middle-incomestage, most developing countries’ economy is hovering low level for a long time, oreven reverse, which fall into the "trap"; But there are a handful of countries andregions successfully avoid the "middle-income trap", smoothly step to the highincome stage.Many factors cause the “Middle-income Trap”, obviously it is the result of thecombined effects of many factors. Many people have studied on the “Middle-incomeTrap”, from the perspective of government policy, economic structure and even thesystem. This paper pays attention to the risk of the “Middle-income Trap” andResearch on the Income Distribution System Reform of China. Research shows thatthere is a logical correlation between the imperfect of income distribution system andthe “Middle-income Trap”. First, a direct consequence of the income distributionsystem defects is the residents’ income gap widening, which affects consumption.Because the income is low, consumer demand of residents’ can’t turn into realitydemand. On the other hand, the income gap will suppress the growth of investment.Residents’ actual consumption can’t raise, production of power will be reduced, so asto affect the growth of investment. Both consumption and investment can driveeconomic growth, the weakening of them leads to economics’ anemic growth.Secondly, from the perspective of the defects of China’s income distribution systemitself, the individual income tax is overweight, so it affects residents’ consumptionability and strength of support for government reform; the enterprise income tax is sounreasonable that it aggravate the burden of small and medium-sized enterprises,restrict enterprise’s ability to participate in market competition; the redistribution mechanism is imperfect, such as the government’s transfer payment has problems, thepublic product and the service spending is insufficiency, education investment limited,all this will hinder the development of society and progress, influence the economicsustainable development. So the income distribution system is one of the key factorsto a country whether it can smoothly across the middle-income stage. Within thescope of international experience, the countries of Latin American which fall into the"middle-income trap" is related with their distribution system defects. The negativeeffect of the distribution system has affected the Latin American countries’ economicsustainable growth; on the contrary, the countries and regions which successfullyacross the "middle-income trap" attaches great importance to the improvement of thedistribution system and its effect.Therefore, in order to avoid the risk of the “Middle-income Trap”, China mustpay attention to the reform and perfect of the income distribution system.The goal thatgovernment pushes forward the distribution system reform is increasing people’sincome, narrowing the income gap, improving the distribution pattern andreconstruction distribution order; the key to distribution system reform is the reformof the primary distribution system, supplemented by the redistribution system so thatwe can comprehensive a system reform; the entry point to the distribution systemreform is to improve the proportion of labor remuneration in primary distribution toimprove the situation, and improve the tax system, strengthen regulation of taxation.