Comparative Analysis on Transition Trap and Middle-Income Trap in Current Economic Development

Zhan Jianxing

(School of Economics and Management　Northwest University,Xi’an　Shaanxi　710127)

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Comparative Analysis on Transition Trap and Middle-Income Trap in Current Economic Development

Zhan Jianxing

(School of Economics and ManagementNorthwest University,Xi’anShaanxi710127)

Ⅰ.The emerging transition trap and middle-income trap caused by the inadaptability of traditional economic development pattern

1.Attenuation of economic growth impetus bringing serious challenge to economic growth pattern

During thirty years of China’s development,the economy enjoyed an average growth rate of almost 10% per year.〔1〕This helped China acquire a qualitative leap from the brink of collapse to the world’s second largest economy,but it also brought a series of problems to China as the growth rate is beyond the objective tolerance capacity.The long-term economic development at top speed was realized by the excessive pursuit of high return and the large-scale gaining of immediate interest.The problems of waste of resources and over-investment during this stage also led to the attenuation of the economic growth impetus,extreme imbalance of economic development and severe inflation.The decelerated growth of economy deeply influenced the process of the transition and caused economic stagnation and recession,which will lead the country into the middle-income trap and trigger the deep level of social instability.

2.The sluggish adjustment of industrial structure giving rise to fragile and unstable economy

Many economic professionals suggest that,in order to avoid the“middle-income trap”, the structure shift must be implemented which includes the all-direction adjustment of industrial structure and large-scale promotion of consumption.These measures will help economic growth to rely on technical innovation instead of more resource investment.With more frequent international trade,the advantage of low labor cost has been weakened by other countries.For a long time,the labor intensive industry has played a major role in China’s economy,which is now facing more challenges brought by the same kind of countries.However,China cannot compete with developed countries in the fields of core technology and innovation capability.The short-term transition from the labor intensive to technology intensive is unreachable,which leads the country into a dilemma.Breaking through the dilemma calls for China to adjust the industrial structure,promote core technical capacity and realize the lifting of the value added by manufactures.

3.Unfair income distribution gravely threatening economic and social stability

The significant cause of large gap between the rich and the poor is income inequality.Fluidity of resource in China is vulnerable.Welfare institution got rare attention and development.The gap is huge.The elimination of these problems in short time is unrealistic.Regulation and control in income distribution need to be worked out.〔2〕

Ⅱ.Empirical analysis on spanning transition trap and middle-income trap of developed countries

1.Relying on science to drive industrial development and promote independent innovation strategy

The economic transition and development of South Korea has been praised as “The East Asian Miracle”,which relied on technical innovation and the power of science.〔3〕With the transition from low value-added industries to high value-added ones,the industries and enterprises in South Korea enjoyed promoting international competitiveness,such as Samsung and LG.〔4〕

2.Enlarging educational fund and exploiting human capital

Since 1960s,Taiwan has zealously focused on its education development,and wanted to comprehensively realize the promotion of labor productivity and the perfection of social security system.〔5〕In addition,through a series of institutional guarantees,Taiwan has provided its working people with an excellent career development plan and ensured a favorable exploitation of human resource in order to upgrade industrial structure.

3.Realizing economic transition through service industry and emerging industry

Another typical country is Japan.This country successfully avoided middle-income trap and gradually opened international market through industrial restructuring including the rise of electronics industry and manufacturing industry.Japan only spent 19 years marching into the high-income country and successfully sought out a unique path of transition from agriculture to light industry and high-tech manufacturing.〔6〕Through strengthening urban and rural development and social governance,Japan has built a stable social environment.

Ⅲ.Strategic analysis on spanning transition trap and middle-income trap

1.Identifying selection and coordination of economic development pattern and relieving the pressure on economic growth

Choosing an adaptable way to develop economy requires the government to consider whether or not the investment program can meet the needs of market and whether the needs enjoy the increasing trend.And then,the government also has to pay attention to the problem whether the resource quantity can match labor resource.Finally,this is also a problem whether independent innovation can drive continuous improvement of the industry.Only after considering these questions can the directions and goals of the development be clear and definite.

2.Strengthening the function transition of administrative department and promoting technology guided economic transition

In the economic transition,the government and the related administrative department need to play significant role in supervision and guidance.On one hand,through the formulation of policy and regulation,these departments need to regulate the development environment,and lead the healthy and steady development of enterprises.On the other hand,as the supplement of market mechanism,the government has to carry out the macroscopic readjustment and control.In addition,the government needs to continue the talent strategy and also need to pay more attention to improve the training system of professional talents and practice-based talent.

3.Fully consideration on the influence ranges of all the factors to reasonably program the economic development path.

China has suffered the double pressure in the export trade.Therefore,China has to be more reasonable to program its development path.On one hand,domestic market needs can be exploited which could enlarge domestic consumption.On the other hand,labor intensive export production needs to be transformed into technology intensive export production.During the transition,the government especially needs to establish the protection of proprietary brands and formulate the related protection policies in order to avoid foreign investment monopoly.In the meantime,the government has to strengthen the system of intellectual property rights protection and establish the core competitiveness of state-owned enterprises.

4.Deepening the reform of economic system and improving market-oriented economy mechanism

During the improvement of market-oriented economy mechanism,the regulations and system introduced by the government should be regarded as principle.With the foundation of complying with market environment,the government needs to make sure that various types of resources enjoy rational allocations to meet people’s needs in various aspects of living,technology,environmental protection and sustainable development.Meanwhile,the reformation of state-owned enterprises should be listed as key focus area.The over-occupation of resources by state-owned enterprises should be eliminated,which could impede the development of the whole society.〔7〕

Ⅳ.System guarantee of spanning the transition trap and middle-income trap

1.Reforming the current income distribution system and enlarging the residents income

The government can carry out improving resident income distribution system from two aspects.In the first place,the reasonable regulation of all industrial development environments is necessary,including breaking the monopoly of financial services sector and electrical and other power resources-based sectors,in order to build a fair competition environment and avoid too much waste of social capital and resource.Furthermore,the adjustment of resident income can rely on urbanization.Through formulating related policy,the goals of helping rural residents to develop profitable industry,decreasing consumption cost and improving living conditions are reachable.

2.Regulating the tax policy to decrease the gap of wealth

There are many ways to implement more effective tax policies in order to decrease the gap of wealth.For example,the readjustment on enterprise profit tax and personal tax of state-owned enterprise could lower the burden of working-class.In middle and small-sized enterprises,negotiation system on wages could eliminate the inequity in the labor market and promote part of low income residents to the level of middle income ones.In addition,based on the policy support and the encouragement of self-employment,the government can establish integrated personal income tax system,which combines comprehensive and classification methods.Meanwhile,the implementation of taxing on monopolizing industry can regulate high income and strictly control off-the-books income.

3.The efficient cognition of economic situation and the establishment of coping mechanism

Scientific cognition of present economic situation is conductive to formulate correct development planning,scientifically regulate economic system and adapt to current changeful environment.The establishment of coping mechanism includes efficient cognition and evaluation on present resource,reasonable exploitation of technology and labor resources,inspection system on state cadre and encouragement of technological innovation,which can promote national comprehensive strength and rise to the challenges.

通過對(duì)算法進(jìn)行分析可以發(fā)現(xiàn)，K-means聚類算法的時(shí)間復(fù)雜度是O( )nKt，其中n是樣本數(shù)，K是聚類數(shù)，t是迭代次數(shù)( )K≤t,t≤n，具有可伸縮性和高效率。對(duì)于產(chǎn)生類內(nèi)緊密、類間疏離的聚類結(jié)果，具有較好聚類效果。

4.Improving the current system of economic administration and creating a fair economic environment

Building a fair and harmonious economic development environment plays an unchangeable role in economic transition and further economic development,income regulation,and settlement of social contradictions.The precondition of improving the current system of economic administration relies on efficient utilization of resources,environment protection and perfection of technology innovation system,in order to find a path of socialism economic development with Chinese characteristics.

Ⅴ.Conclusion

The factors that caused the transition trap and middle-income trap in China include the decrease of economic growth impetus,sluggish adjustment of industrial structure,and social instability caused by income distribution inequality.In order to span these two traps,the government needs to choose an explicit economic development pattern,strengthen the function transition of administrative department,promote technology-guided economic transition,reasonable program economic development path,and deepen improvement of market-oriented economic system.In addition,the reformation of income distribution system,adjustment of tax policy,establishment of environment coping mechanism and the perfection of economic administration system also need to be implemented in order to build a fair environment for further economic development.

(Translated by Fang Jian)

References:

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China now is in the vital stage of the economic transition,which is facing the severe challenge of spanning the middle-income trap.Only the clear recognization of current domestic and overseas situations,the vigorous implementation of self-dependent innovation,and the energetic exploitation of international market will contribute to the fundamental industrial restructuring and the early achievement of marching into high-income countries.

economic development;transition trap;middle-income trap

About the author：Zhan Jianxing (1975—),PhD candidate,School of Economics and Management of Northwest University,research field:chain pattern of rehabilitation.