China set to break key economic barrier despite trade war, but can it avoid the middle income trap?
- China’s per capita gross domestic product (GDP) is set to exceed US$10,000 in 2019 despite the turbulence caused by the trade war with the United States
- This will allow the Communist Party to deliver its goal of a ‘comprehensive well-off society’ in China by 2021
China’s is set to a break a key barrier of increasing per capita gross domestic product to US$10,000 despite the trade war with the United States, one of “two centennial goals” for creating a “comprehensive well-off society” by 2021.
Officials, including Han Wenxiu, a deputy director at the Central Financial and Economic Affairs Commission, earlier stated that China has passed that psychological threshold in 2019.
The World Bank defines high-income countries as those with per capita gross national income (GNI) of above US$12,375, with China belonging to a large group of “upper-middle countries” where per capita GNI falls in the wide range of US$3,996 to US$12,375.
China’s second centennial goal is for it to become a “fully developed nation” by 2049, the 100th anniversary of the founding of the People’s Republic.
Beijing is keen for China to avoid the so-called middle income trap, a development stage where a country attains a certain level of income but then stagnates and remains at the same level because it cannot progress from low-cost manufacturing into hi-technology industries.
“My previous study showed that China’s per capita GDP could reach US$12,000 as early as 2021 if there was no China-US trade friction,” he told an event in Beijing earlier this month. “The timing will be postponed, but for two years at most.”
“It is a significant figure and milestone,” said Ding Shuang, chief Greater China economist of Standard Chartered Bank, with Beijing’s records showing that China’s per capita GDP was below US$1,000 in 2000.
“Given the growth momentum, China will steadily move towards the high-income country threshold of US$12,000 or even US$15,000.”
Li Daokui, a professor at Tsinghua University, wrote in an opinion piece published this week that China could double its middle income population in 15 years to 800 million.
“China’s middle income population size will double the middle class in US, European Union and Japan combined by then,” Li wrote.
Liu Xuezhi, a senior researcher with the Bank of Communications, the country’s fifth largest lender, said price inflation and actual growth of disposable income should be considered when making such international comparisons.
“The rise of per capita GDP doesn’t necessarily mean higher income,” he said.
China’s personal disposable income was only 28,228 yuan (US$4,040) last year, official figures showed, below the level of the US (US$50,203), Germany (US$38,996) and Mexico (US$16,310).
“We should not solely pursue the growth of overall economic size, but should try to tackle such structural issues,” added Liu.