How to cross the "middle income trap"

Connotation and essence of "middle income trap"

The concept of "middle income trap" was first put forward by the World Bank in the East Asia Economic Development Report in 2006. Its connotation mainly refers to: after the per capita national income reached 3,000 US dollars, some countries fell into a period of stagnant economic growth and could not successfully rank among the high-income countries for a long time. According to the latest definition of the World Bank, countries with per capita national income below $824 belong to low-income countries; Countries between $825 and $3,254 belong to low-and middle-income countries; Countries between $3,255 and $65,438+$00,064 belong to middle and high income countries; 10065 is a high-income country. According to the research of the Asian Development Bank, if a country has entered the ranks of low-and middle-income countries for more than 28 years and failed to meet the standard of high-and middle-income countries, it can be considered as falling into the "low-and middle-income trap"; Entering the ranks of middle and high income countries but failing to enter the ranks of high income within 14 years can be regarded as falling into the "middle and high income trap". In this way, among the 52 emerging middle-income countries since 1950, 35 have fallen into the middle-income trap, of which 30 have fallen into the middle-low income trap and 5 have fallen into the middle-high income trap. Among these 35 countries, 13 is a Latin American country, 1 1 is a Middle East and North Africa country, 6 are sub-Saharan African countries, 3 are Asian countries (Malaysia, Philippines and Sri Lanka) and 2 are European countries (Albania and Romania). Among them, some countries have been caught in the "middle income trap" for quite a long time. For example, Peru, Colombia and South Africa have been caught in the "middle and low income trap" for more than 60 years, and Venezuela has been caught in the "middle and high income trap" for more than 60 years. In sharp contrast with these countries, other economies, especially emerging economies in East Asia, have completed the leap from middle income to high income in less than 10 years. In this regard, the World Bank affirmed it with the concept of "East Asian miracle".

Why can some countries transition from middle-income stage to high-income stage in a relatively short period of time, while most middle-income countries have been stagnant for a long time and cannot cross the "trap"? In the stage of middle-income development, there are many factors that lead to polarization among countries, including demographic dividend, labor supply growth rate, labor productivity growth rate, economic openness, reduction of market access restrictions, external environment, social stability, fairness of income distribution, etc. It is found that countries caught in the trap usually have the following characteristics: they lose the competitive advantage of manufacturing in low-income and low-wage economies and are unable to compete with developed economies in the field of high-tech innovation. It is impossible for the economy to change from relying on cheap labor or natural resources (such as resources and energy) to relying on a high productivity-oriented growth model.

In fact, the "income trap" refers to a balanced state, that is, after some factors that promote the increase of per capita income play a role, because this factor is unsustainable to some extent, other restrictive factors will offset its role, so the growth of per capita income will stagnate. This also shows that the dynamic mechanism of economic growth is different in different stages of economic development, and the dynamic factors that can effectively promote economic growth in the low-income stage are likely to fail in the middle-income stage. It can be seen that whether a country can successfully transform the growth dynamic mechanism and adjust the development structure in the middle-income stage is the key to whether a country can cross the "middle-income trap".

Risks and opportunities faced by China.

1978 since the reform and opening up, China's economy has shown the characteristics of high growth, high savings, high investment, high consumption, high environmental cost, labor-intensive and export-oriented, which has been called "unsustainable growth" by some foreign scholars. Since the new century, China's per capita national income has increased rapidly, from $930 in 2000 to $7575 in 20 14. At present, China is in the stage of middle-high income development, facing both the unprecedented opportunity to leap into the ranks of high-income countries and the danger of falling into the "middle-high income trap". China's economic development has entered a new normal, which is a trend rather than a cycle. The traditional dynamic mechanism to promote rapid economic growth is weakening, and economic growth is facing a series of practical constraints, such as rising labor costs, tightening bottlenecks in resources and environment, asset bubbles in some areas, reduced investment efficiency, and blocked export growth. Especially in the face of two faits accompli: first, from high-speed growth to medium-high-speed growth; Second, due to the aging of the population, the absolute number of working-age population in China decreased by 3.45 million in 20 12 years, and continued to decrease in 20 13 years and 20 14 years. Of course, there is a lag period of several years from the decline of working-age population to the reduction of labor supply, but it is foreseeable that China's labor supply will soon experience negative growth. When analyzing the long-term trend of economic growth, the following formula can be used: the potential economic growth rate of a country is equal to the growth rate of labor productivity plus the growth rate of labor supply. The Economist has done research. From 200 1 to 2008, the growth rate of labor productivity in China reached 1 1.8%, and it was 7.2% from 20 1 1 to 20 14, with an obvious downward trend. As the growth rate of labor supply is close to zero, 7.2% plus 0, the potential economic growth rate of China is reduced to about 7%. The decrease in labor supply, the aging population and the decline in labor productivity growth are all important factors that cause the decline in economic growth.

Those economies in East Asia that successfully crossed the "trap" all entered the high-income ranks before the population aging accelerated. In the second half of last century, European countries mainly took measures to deal with the problem of population aging, such as introducing immigrants, increasing national human capital investment and raising the legal retirement age. According to China's national conditions, obviously only the latter two countermeasures can be used for reference. At present, the legal retirement age in China is low. By adjusting the retirement system, the unfavorable situation of the decline in labor supply can be appropriately alleviated. The overall quality of human resources in China is low, and the labor supply structure is unreasonable, which leads to a low level of labor productivity and a decline in growth rate. In 20 14, the labor productivity of China was only 20% of that of the United States and 30% of that of South Korea. In the next 10 year, it is particularly important for China to overcome the "middle income trap" and improve labor productivity.

In recent years, there have been many discussions about how to improve labor productivity. It is found that a country's investment in education, scientific research and development, infrastructure and other fields is the "golden key" to promote innovation, improve labor productivity, promote industrial transformation and upgrading, and finally cross the "middle income trap". The investment in education and R&D will be transformed into the improvement of labor productivity and total factor productivity, thus providing new impetus for the sustainable development of the economy. A series of economic theories, including Solow model, show that, to a certain extent, technological progress and the improvement of labor quality are more significant to economic growth than increasing the supply of capital and labor.

At present, China's education expenditure accounts for only 4% of GDP, while the United States has been stable at around 5.5% for a long time, South Korea has exceeded 5%, and Finland has reached 7%. The improvement of the national education level and the quality of the labor force can offset the negative impact of the reduction of demographic dividend on economic growth to some extent. In addition, China should continue to promote educational equity. Due to the extreme inequality of income distribution and education inequality in some Latin American countries, different income classes in society have gradually solidified. This is not conducive to the formation of market competition mechanism, nor to the spread of knowledge and technology among different income classes, and ultimately hinders the improvement of labor productivity in the whole society. As far as R&D is concerned, the R&D expenditure of China's government and enterprises only accounts for 2% of GDP, which is still far behind that of the United States, Japan, South Korea and Finland. For China, a fast-developing country, the advantage of learning from the existing technologies of developed countries is decreasing, and the demand for scientific and technological progress and independent innovation is increasing. The fundamental way out for China's economy lies in strengthening independent innovation. We should learn from the experience of some countries in successfully crossing the "middle income trap", increase investment in education and research and development, improve the national education level and the quality of the labor force, and improve the ability of independent innovation, thus greatly improving labor productivity.

Give full play to advantages, release potential, and rank among high-income countries.

While fully understanding the risks and challenges, we should also see the advantages and advantages of China. First, although the working-age population has reached its peak, with the post-50s and post-60s workforce gradually replaced by the post-80s and post-90s workforce, the overall education level of the workforce, that is, human capital, will accelerate in the next 10 year, thus greatly offsetting the negative impact of the decline in labor supply, so that China is expected to enter the ranks of high-income countries before the demographic dividend disappears completely in 2030. Second, with the reform of the fiscal and taxation system such as "reform of the camp", the effect of promoting the transformation and upgrading of enterprises and industries began to appear. The "reform of the camp" can not only open the deduction chain of the secondary and tertiary industries, reduce manufacturing costs and encourage scientific and technological innovation, but also facilitate the outward divestiture of the producer services within the primary and secondary industries. While promoting the expansion of the tertiary industry market, it will also promote a wider division of labor, cooperation and integration among industries, and provide endogenous power for economic growth. In the future, this effect will be released more obviously. Third, deepening the reform of the financial system, especially the capital market, in recent years will help promote finance to play a greater role in supporting R&D innovation and optimizing resource allocation. Fourth, the relevant policies of the state to eliminate backward and excess capacity are forcing enterprises to transform and upgrade. Fifth, the spillover effect of large-scale infrastructure investment on the overall economic efficiency since the international financial crisis will gradually appear in the next 10 year, which is conducive to further improving the potential growth rate.

Of course, the potential growth rate will not automatically translate into actual growth. In order to turn this potential ability into reality, we must remove obstacles through reform. In addition to increasing investment in education and R&D, the government should also play an active role in the following aspects: First, accelerate the reform of the household registration system, improve the level of urbanization, break the urban-rural division of the labor market, and promote the transfer of labor from the agricultural sector with low productivity to the industrial and service sectors. Throughout the world, countries that have successfully crossed the "middle income trap" have achieved fundamental changes in urban and rural structures, completed the historical tasks of industrialization, urbanization and agricultural modernization, and made agricultural labor productivity catch up with the average social labor productivity, and the per capita income level of urban and rural residents is roughly the same. The second is to strengthen intellectual property protection. The subject of innovation is enterprise, and the soil of innovation is mechanism and environment. The government should provide enterprises with an innovative environment and institutional guarantee, and encourage the masses to innovate. In addition, we should persist in anti-corruption, rectify bureaucracy, speed up the transformation of government functions, especially comprehensively promote the rule of law and create a legal business environment for enterprises.

In a word, as long as the reform and development tasks entrusted by the 18th National Congress of the Communist Party of China and the Third and Fourth Plenary Sessions of the 18th Central Committee are well implemented, and the catching-up experience of successful economies in East Asia is used for reference, China will certainly be able to maintain medium-high growth in the next 10 year, cross the "middle income trap" and successfully rank among the high-income countries.