China’s Economic Growth Prospects
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China’s Economic Growth Prospects

From Demographic Dividend To Reform Dividend

Cai Fang

In this book Cai Fang explores the contribution of demographic transition to economic growth in China’s reform period, depicts the population factors causing the economic slowdown since the second decade of the twenty-first century, analyses the challenges facing its long-term sustainability when the demographic dividend is disappearing, and proposes important policy remedies. He suggests that in order to avoid the middle-income trap, China's economic growth has to transform from an inputs-driven pattern to a productivity-driven pattern, which requires eliminating several institutional obstacles.
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Chapter 6: The risk of a middle-income trap

Cai Fang


Either one goes forward, or he’ll be left behind; either one becomes joyful, or he’ll be sad; either one gets what he wants, or he’ll lose it. (Deng Xi [545–501 bc]) Based on the view that East Asia is the most dynamic region in the world, the World Bank conducts a thematic study of the East Asian economy every four years to summarize its unique experiences and lessons in development and to expose specific problems and challenges facing it over defined periods of time. In its 2007 report, An East Asian Renaissance: Ideas for Economic Growth, the World Bank raised the issue of a “middle-income trap” for the first time. The report shows that “middle-income countries have grown less rapidly than either rich or poor countries” (Gill and Kharas, 2007). Since then, the concept of the middle-income trap has been increasingly discussed among economists. It has been used to illustrate the predicaments of certain Latin American and Asian economies and is applied as a reference for passing judgment on China’s economic prospects. Its relevance to China’s particular case, meanwhile, has drawn more attention since the Development Research Center of the State Council and the World Bank jointly conducted a study on how China can overcome such a middle-income trap (World Bank and Development Research Center of the State Council, People’s Republic of China, 2013).

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