China has yet to join the ‘rich country’ club. Has the middle-income trap been sprung?

Predictions that China would reach the upper echelon of national incomes have yet to come true – and the gap has only widened in recent years

Some analysts argue the goal can still be met, while others say even if it cannot be done it might not be as crucial as previously thought

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Published: 6:00am, 1 May 2024Updated: 11:02am, 1 May 2024

In 2014, Justin Lin, a prominent economist and adviser to the Chinese government, projected that the country would reach high-income status by 2022.

Last month, after a decade in which that prediction did not come to pass, he made some adjustments. Lin declared it would happen in 2025 or 2026, so long as the economy maintains gross domestic product growth of 5 per cent – also Beijing’s target for this year.

While authorities have rarely touched upon the topic of the middle-income trap in recent years – a situation where a country stays at a certain income level and is unable to enter the ranks of the advanced economies – macroeconomic data suggests the subject cannot be far from mind.

With a gross national income (GNI) per capita of US$12,597 last year, China was more than US$1,000 behind the international threshold of US$13,845 defining a high-income country in 2023.

In comparison, in 2021, it was just US$100 away by the World Bank’s criterion – a per-capita GNI of US$12,551 compared to the US$12,695 requirement that year.

China stands at a crucial juncture to breach that gap, experts said, as increasing economic containment from the United States and its allies threaten its transition to a tech-driven and green society. To avoid the fate of other countries which have fallen into the trap, they said, it is essential to maintain a high rate of economic growth.

Comparing the journey to the high-income ranks to an 11km walk, Shi Lei, a professor of economics at Fudan University, said China has travelled the first 10km with vigour.

China has yet to join the ‘rich country’ club. Has the middle-income trap been sprung?

Predictions that China would reach the upper echelon of national incomes have yet to come true – and the gap has only widened in recent years Some analysts argue the goal can still be met, while others say even if it cannot be done it might not be as crucial as previously thought

Predictions that China would reach the upper echelon of national incomes have yet to come true – and the gap has only widened in recent years

Some analysts argue the goal can still be met, while others say even if it cannot be done it might not be as crucial as previously thought