Will China fall into the "middle income trap"?

2011-4-9

 

To avoid the potential trap, the government should raise people's incomes and improve its social security nets to boost domestic demands, while also ensuring relatively fast economic growth in a sustainable way, according to Wang.

 

Zhou Tianyong, a professor with the Party School of the Communist Party of China Central Committee, echoed Wang's views, saying that the government had realized the problems with its economy and adopted measures addressing them.

 

In the country's 12th Five-Year Plan (2011-2015) for National Economic and Social Development, China sets the target for annual GDP growth at 7 percent, while aiming for an annual income growth of more than 7 percent.

 

"This is the first time that China has aimed at keeping residents' income increases in pace with its GDP growth, underlining its resolve to let all people share the benefits of development," said Zhou.

 

However, what matters more are the concrete measures taken by governments at all levels to reform the country's income distribution system, and there is still a long road ahead, he said.

 

Wang Jun told Xinhua that the government should establish relevant mechanisms to raise the proportion of residents' income in the GDP.

 

"If people feel confident about spending, they will be willing to consume more. The country has to boost domestic consumption to drive growth in the future," Wang said.

 

Wang believes that China is capable of achieving relatively fast growth as it boasts the world's largest consumer market.

 

"China's urbanization process will continue for at least another 20 to 30 years. There is great potential for further growth with the hikes of final consumption rate," Wang said.