Structural Change and Mid-Income Trap – Under which conditions can China succeed in moving towards higher income status?

Abstract

After two decades of very high economic growth rates, China has now reached the so-called mid-income range or ‘trap’, i.e. a development level where it has to expect slower economic growth rates (a ‘New Normal’) for the future. Associated with that is a structural change towards tertiarization which requires some fundamental rebalancing of China’s economy. Overcoming this mid-income trap and further catching up to the most advanced countries in the world is a very demanding task. In order to succeed China has to efficiently manage the mentioned rebalancing (structural change) process towards tertiarization and to undertake many fundamental structural reforms.

Keywords

• Middle-income trap
• economic development
• China
• structural change
• tertiarization