Managing the Middle-Income Transition

Managing the Middle-Income Transition

Challenges Facing the People’s Republic of China

Edited by Juhzon Zhuang, Paul Vandenberg and Yiping Huang

The growth model of the People’s Republic of China has been based on high investments, exports, low-cost advantage, and government interventions. This model has successfully transformed the country from a low-income to an upper middle-income economy. However, the model has generated contradictions that could undermine future growth. Making the transition to high income requires greater reliance on efficiency and productivity improvement, innovation, and market competition. This book examines the challenges faced by the People’s Republic of China in sustaining robust growth, and policy options for making a successful transition to a high-income economy to avoid getting caught in the middle-income trap.

Chapter 12: Industrial upgrading: can progress continue?

Paul Vandenberg

Subjects: asian studies, asian development, asian economics, asian politics and policy, asian social policy, development studies, asian development, development economics, economics and finance, asian economics, development economics, politics and public policy, asian politics, social policy and sociology, social policy in emerging countries


The fastest supercomputer in the world in 2010 was housed in 100 refrigerator-sized cabinets at the National Center for Supercomputing in Tianjin. It had 14 000 processing chips and could make 2500 trillion calculations per second, which was rather quick indeed. This computing behemoth lost its title as the fastest to a machine in Japan a year later and then to one in the United States (US). But in 2013, the People’s Republic of China (PRC) regained the top spot with a new computer at the National University of Defense Technology (BBC 2010; Top 500 2013). The PRC also boasts one of the fastest trains in the world: the CRH380A runs at 431 kilometers an hour (km/h) on special tracks that are part of the new high-speed Beijing–Shanghai route. Even in conventional travel, the country is a leader, producing more automobiles than any other country. It churned out 22 million vehicles in 2013, a level greater than the combined production in Japan and the US (Organisation International des Constructeurs d’Automobiles 2014). The PRC is also a global leader in other high-value sectors. For example, 26 percent of its exports are high-technology, ranking it ninth in the world in 2011 in this area—higher than such technological heavyweights as the US, Japan, and Germany. Thus, by some measures, the PRC has achieved high technological sophistication and has done so in a remarkably short time since beginning reforms in the 1970s.

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