“When economic growth was really rapid, after around 2005, you didn’t tend to notice all the things they failed to do,” Derek Scissors, an AEI senior fellow and the report’s author, said in an interview. “China can’t become rich with 550 million really poor people living in rural areas.”

Scissors tries to assess the likelihood that Beijing can escape that trap by comparing China with South Korea and Japan at similar points in their development, roughly four decades after their economies opened in 1979, 1962 and 1946, respectively.

Economies that emerge from poverty only to plateau, unable to advance further, are said to be victims of the middle-income trap; these include Malaysia, Thailand and Indonesia, economists say. Those who have escaped its clutches include South Korea, Japan, Singapore and Taiwan.

Beijing’s recent short-term challenges – including an economic slowdown, a roaring trade war with Washington and the political challenge Hong Kong represents – would have limited long-term impact, Scissors said, if China were to tackle tough, fundamental reforms needed to propel it to the next level.

His analysis finds that China’s personal income growth in dollar terms is less than half of Korea’s and a third of Japan’s at the same stage of development. In local currency terms, meanwhile, Korea outpaces China for most of its comparable history while Japan generally lags.

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Keeping rough pace with Japan at the four-decade mark is pretty impressive. But Scissors argues that Japan was about to face a crisis and that the similarities do not bode well for China.

“We all know what happened to Japan within a few years after 1985,” as high debt and limited reform led to three decades of economic stagnation, said Scissors. And while Beijing has authoritarian policy tools a market economy lacks, its debt picture is worse than Japan’s at a similar stage, he argues.

“There are obvious steps that China could take with major reforms before it gets hit with a major demographic crunch,” Scissors said. “But despite not facing elections, I see no evidence they have the stomach for it.”

Economists spend inordinate time trying to predict China’s future in part because its state-led economic model has defied conventional theory.

“China’s very hard to figure out,” said Nicholas Lardy, senior fellow with the Peterson Institute for International Economics and author of The State Strikes Back, which examines the reasons behind China’s recent slowdown.

Despite rapid growth over decades, China has reached only 30 per cent of US per capita economic levels, compared with South Korea’s 55 per cent and Japan’s nearly 70 per cent, before it slowed down, he said. “The question is whether China can continue to have rapid growth for a decade,” Lardy said. “The US is so far ahead.”

China also matters because of the varied global implications should it grow at 4, 6 or 8 per cent in coming years.

“If the 800-pound gorilla tilts right or left, everyone has to get out of the way,” Scissors said. “The world has a stake in China’s success in a way the world doesn’t in Korea, which is the size of a Chinese province. We should be concerned that it’s not doing what it needs to do to be successful.”

Economists readily concede that comparing countries with very different sizes, economic systems and starting points is difficult at best. Scissors focused on China’s rising personal income pace through its productive use of land, labour, capital and innovation in the decades after economic blast-off, relative to South Korea and Japan at similar points. Scissors argues that personal income, the money in average Chinese pockets, is a better measure of prosperity than China’s “fetishising” of gross domestic product and pre capita GDP.

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Moving into the 1980s, China successfully increased crop yields and shifted tens of millions of labourers from farms into manufacturing jobs. But it has lagged well behind Japan and Korea since then in boosting income for rural dwellers, affecting a huge part of the Chinese population.

“Rural incomes remain unpleasantly low due to poor policy choices concerning land ownership,” the report said. This is amplified by China’s household registration system, or hukou, that has kept millions of farmers pinned to the land, unable to share in urban educational opportunities or rising wealth from property appreciation.

Private ownership of rural land, relative to condominiums in urban areas, remains largely forbidden in China under a remnant of socialist ideology.

As the economy grew, Beijing faltered on marshalling capital into productive investments, something that South Korea excelled at, the report argues, particularly under Chinese President Xi Jinping, who has propped up often bloated state-owned companies to bolster state power and safeguard social stability.

“They’re putting more and more funds into the least efficient part of the economy,” Lardy said, echoing Scissors. “Xi has emphasised just about since the beginning of his term that state-owned firms have to be bigger.”

With land, labour and capital topping out as engines of growth, Beijing has wisely turned to innovation and automation as its population ages. But the relatively low number of patents compared to its size, the dearth of capital directed at private companies best positioned to automate and its legions of poorly educated rural workers compounded the challenges ahead despite the headlines and ambitious state targets, Scissors said. And while research and development spending was growing, it remained well behind the other two nations at the same stage, he said.

Even Japan, with its many advantages, has not overcome the economic drag of a rapidly ageing population, “and China’s education levels are its clearest comparative weakness”, Scissors said.

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Alexander Wolf, the Hong Kong-based head of Asia investment strategy for JP Morgan Wealth Management, disputes Scissors’ idea that China is significantly behind Japan or South Korea at a similar development stage, although he agrees with his broad point that China has a long way to go.

“Everyone obsesses over the middle-income trap, but it’s just as hard if not harder to get to middle income than it is to escape the trap,” Wolf said. “I look at China as treading right on the path of other East Asian tigers.”

China’s leaders were well aware of the headwinds the country faced, he said. But the reforms needed to propel it to the next level – including rule of law, more latitude for private companies and the free flow of ideas and information – required deep structural changes that were “beyond the reaches of a Communist Party more focused on control and longevity”, he said. On this point, Lardy, Scissors and Wolf all agree.

A common belief is that in the same way trees cannot grow to the sky, China is tapped out after three decades of explosive growth. This is underscored by the Communist Party’s embrace in recent years of “slower, more sustainable” growth.

Despite spending vast sums on questionable stimulus and piling on debt after the financial crisis, China could extend its high-growth period if it took difficult political steps, such as allowing rural land ownership for individuals and removing hukou-related educational impediments. But it had largely squandered its opportunities, Scissors said.

“Japan is the warning,” he said. “It’s not inevitable. They’re not rich enough yet to say it’s inevitable.”