The Concept and Essence of Middle-Income Trap

Abstract

Since the start of China’s reform and opening-up in 1978, it has experienced nearly 40 years of rapid economic growth, with its gross domestic product (GDP) per capita crossing the $1000 mark in 2001, surpassing $3000 in 2008, exceeding $8000 in 2015 and reaching $8123 in 2016. But in recent years, economic growth has slowed down markedly. This is not only a fact, but also a new normal of social consensus. Has China encountered a middle-income trap? Can the development problems encountered by China be explained by the current concept of middle-income trap and related theoretical framework? And can a reasonable solution to crossing the middle-income stage be found? To answer these questions correctly, we must accurately grasp the essence of the concept of middle-income trap. To understand the essence of middle-income trap, the concept must be reinterpreted in a context that goes beyond the experience of a particular country and a purely economic perspective. This means that the middle-income trap is understood not only as a problem that some developing countries may encounter in their own development, but also as a problem that all countries may encounter in the middle-income stage; the middle-income trap will not only be defined from the perspective of economic growth, but also understood from the perspective of social development.