China Poised to Avoid Middle Income Trap

China is poised to avoid the middle income trap in the coming five to ten years as innovation and structural adjustment will create new fundamentals to support medium-to-high speed growth.

The middle income trap occurs when a countrys growth plateaus and eventually stagnates after reaching middle income levels. According to the National Bureau of Statistics （NBS）， in 2012， China became a middle income country with its per capita GDP exceeding 5，000 US dollars.

Chinas per capita GDP was 7，575 US dollars last year， and is estimated to hit 10，000 US dollars in 2020. World Bank statistics show that only 13 of 101 countries and regions that have entered the middle income stage in the 1960s escaped the middle income trap.

From Oct. 26 to Oct. 29， the fifth plenary session of the 18th Communist Party of China Central Committee was held in Beijing to discuss the 13th Five-Year Plan， Chinas development blueprint for the next five years （2016-2020）.

“The next five years will be a key period for China to deepen reforms along with global economic adjustments，” said Zhou Mi， an associate professor in economics at Nankai University in Tianjin Municipality.

After three decades of break-neck growth， Chinas economy has begun to slow， with GDP growth dropping to a six-year low of 6.9% in the third quarter of this year， slightly lower than the 7% posted in the previous two quarters.

China is striving to move beyond its previous economic mode， which pursued growth at the expense of the environment. While the government has repeatedly assured medium-to-high growth will be maintained and China will not fall into the middle income trap， doubts on the prospects of the economy remain.

According to Zhou， China can escape the middle income trap in the next five to ten years through innovation and reforms.

The service sector must be improved and much work needs to be done to make this sector strong and competitive， she advised.

There are already plenty of signs of improvement. Beijing City recently relaxed restrictions on foreign investment in financing， travel， entertainment， health and medical insurance.

While national strategies such as the coordinated development of the Beijing-Tianjin-Hebei region， the Belt and Road Initiative and the Yangtze River Economic Belt will go some way to support economic transformation， according to Zhou.

In the first three quarters， Chongqing municipality in southwest China reported 11% growth year on year， the fastest among the 27 provinces that have released their economic data.endprint