China can avoid middle income trap through reform

March 7, 2013 6:46 am
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Sound income distribution reform will promote social harmony in China/FILE
Sound income distribution reform will promote social harmony in China/FILE
BEIJING, Mar 7 – China can escape the middle income trap through industrial restructuring and income distribution reform, economists said on Thursday.

Rising income disparity and social disorder are the major causes of the middle income trap, said Li Yining, a renowned Chinese economist, at the ongoing annual session of the Chinese People’s Political Consultative Conference (CPPCC) National Committee, China’s top political advisory body.

Sound income distribution reform will promote social harmony in China, Li said, adding that technological innovation and relevant reforms can help China survive the middle income trap.

Li is also a member of the CPPCC National Committee.

Upgrading China’s industrial structure through innovation and improving its economic competitiveness will create more jobs in cities and prevent problems caused by excessive urbanization, said Justin Yifu Lin, a professor at Peking University and former chief economist at the World Bank.

The income gap will also be reduced, as those who move to cities will be able to obtain higher-paying jobs, said Lin, also a member of the CPPCC National Committee.

The middle income trap occurs when a country’s growth plateaus and eventually stagnates after reaching middle income levels. China became a middle-income country in 2012 after its per capita GDP exceeded 5,000 U.S. dollars, according to the National Statistics Bureau.

World Bank statistics show that only 13 of 101 countries and regions that entered the middle-income stage in the 1960s escaped the middle-income trap.

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