China’s annual economic growth has slowed since the global financial crisis, dropping from 14.2% in 2007 to 6.9% in 2017. The question as to whether China would fall into the middle-income trap (MIT) has attracted plenty of discussions. However, China is a diverse country with uneven economic development. Some provinces are far more advanced than others. Therefore, it might be inaccurate to look at China as one single entity to make a judgment on the MIT issue. Instead, looking into each province and comparing provincial-level differences would be more insightful.
This case is essentially about economic growth and development in general, and that of China in particular. It makes the topic of growth more interesting by discussing the triggering factors of the MIT through comparing the differences between a “trapped” and an “escaped” province, i.e., Shaanxi and Jiangsu. To alleviate the regional development gap, Shaanxi and Jiangsu became paired poverty alleviation partners in 1996 under the guidance of the Chinese central government. However, more than 20 years have passed, yet there is still a huge gap between the two provinces in many fields. Jiangsu’s GDP per capita has surpassed the range of MIT, while Shaanxi’s has not and is very likely to be trapped with the continuing slowdown of its economic growth. The key difference between the two provinces is not their resources, but their development policies.
the Middle Income Trap