China risks fall into middle-income trap

Source:Global Times Published: 2015-4-29 18:08:02

There is a 50 percent chance that China will get caught in the middle-income trap, Finance Minister Lou Jiwei said at a recent economic forum at Tsinghua University.

The term middle-income trap refers to a common phenomenon that plagues developing countries, in which a country's economic growth stagnates once it achieves a moderate level of income.

Many developing countries have experienced economic downturns after their per capita GDP exceeds $7,000. China's per capita GDP reached $7,575 in 2014, making it a middle-income country.

China needs to keep its GDP growing around 7 percent a year. To maintain this growth rate, it has to depend on industrial upgrading and technological innovation.

China also needs to speed up reform of income distribution system to reduce the widening gap between the rich and the poor.

The country should aim to optimize its income structure to maintain a stable society.

Third, the country needs to follow the rule of law to improve the governance system.

From past experience, countries fall into the middle-income trap because of unfair income distribution, development strategy mistakes and slow industrial upgrading.

The author is Wen Feng, a media personality.

Securities Daily

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