The People’s Republic of China in the Middle-Income Trap?
In 2011, the People’s Republic of China's economy started to decline, raising concerns that the country could suffer severe growth slowdown or fall into the middle-income trap.
Over the last decade, a growing body of literature dealing with the phenomenon of the “middle-income trap” (MIT) has emerged. The term MIT usually refers to countries that have experienced rapid growth and thus reached the status of a middle-income country in a very short period, but have not been able to further catch up with the group of high-income economies. In particular, since the beginning of the growth slowdown of the economy of the People’s Republic of China (PRC) in 2011, there has been rising concern that the PRC is, or will also be, confronted with such a trap. We analyze the PRC’s MIT situation, considering both the (absolute and relative) empirical MIT definitions and MIT triggering factors identified in the literature. We survey the recent literature, make our own MIT forecasts, and analyze under which conditions the PRC could be caught in an MIT.
WORKING PAPER NO: 749