The People’s Republic of China in the Middle-Income Trap?

Abstract

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 (MIC) in a very short period of time, 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. This paper analyzes the PRC’s MIT situation taking into account both the (absolute and relative) empirical MIT definitions and MIT triggering factors identified in the literature. We not only survey the recent literature, but also make our own MIT forecasts and analyze under which conditions the PRC could be caught in an MIT.