Managing the Middle-Income Transition
Show Less

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.
Buy Book in Print
Show Summary Details
You do not have access to this content

Chapter 3: Avoiding the middle-income trap: policy options and long-term outlook

Juzhong Zhuang, Paul Vandenberg and Yiping Huang


The People’s Republic of China (PRC) graduated from low-to middle-income in 1998 and, until very recently, generated annual growth rates close to double digits. But the country remains well behind advanced economies in technology and productivity, and it needs to continue growing strongly and narrow these gaps to attain high-income status. A low-cost advantage significantly fueled the rapid growth of the past three decades. Yet, rising wages and an aging population mean that increasingly the PRC needs to drive growth with greater productivity and innovation, upgrading of technology, and by shifting from low-cost to high-value production. At the same time, it must address the problems created by incomplete reforms, an issue compounded by rapid growth rates. These have caused economic imbalances and contributed to rising inequality which, if not addressed, could become binding constraints on growth. This chapter looks at how the PRC should respond to these challenges. It argues that to grow beyond the low-cost advantage, avoid a middleincome trap, and ensure successful transformation, the country needs a new development strategy. This should (1) step up innovation and upgrading; (2) deepen structural reforms, in particular reforms of enterprises, labor and land markets, the financial sector, and the fiscal system; (3) develop the services sector and scale up urbanization; (4) maintain macroeconomic and financial stability; (5) make growth more inclusive; (6) promote a green economy; and (7) strengthen international and regional economic cooperation.

You are not authenticated to view the full text of this chapter or article.

Elgaronline requires a subscription or purchase to access the full text of books or journals. Please login through your library system or with your personal username and password on the homepage.

Non-subscribers can freely search the site, view abstracts/ extracts and download selected front matter and introductory chapters for personal use.

Your library may not have purchased all subject areas. If you are authenticated and think you should have access to this title, please contact your librarian.

Further information

or login to access all content.