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Seize the Window Period of Transition and Cross the Middle-income Trap


By Li Wei, DRC

China has entered the window period of transition. Since 2012, China's economic growth rate has experienced a rapid decline in the short term, falling from 9.5% in 2011 to about 7% in 2015. Viewing from the positive side, during the 13th Five-Year Plan period, China's GDP can maintain a growth of 7% annually, while some holding passive view predicted that during the 13th Five-Year Plan period, China's annual GDP will fall to 4.5%. On the one hand, after 30 years of reform and development, China’s material foundation has greatly expanded. With enhanced economic strength, the institutional mechanism adaptable to market-oriented economy has gradually improved, which has enabled China to gain a bigger say in the international economic governance and enhanced China’s ability to deal with all kinds of complicated situations and severe challenges. On the other hand, material wealth also needs further growth, and various constraints of economic development have constantly increased. People have raised a higher demand on social fairness and justice, whereas the difficulties in bringing forward related policies for different social interest groups have increased. People’s demand on high quality life has become more and more urgent, but environmental governance is becoming increasingly difficult. Under the opening policy, capital, talents, and flows of cross-border technology have become more and more convenient, while the competition of quality factors of production has become much more fiercer worldwide.

We should change the way of development to promote the economy towards the mid-to-high growth level. The essence of the development and transformation is the transformation of the development mode; the most important task is to promote the economy towards the mid-to-high growth level and the basic symbol is to form a new kind of economic system. In other words, while expanding economic scale and enhancing the well-being of the people with a higher productivity, we should realize a balanced development with fairness and sustainability so as to successfully cross the "middle-income trap" and make China become a modernized and high-income country. To promote the economy to a mid-to-high level is an overall and systematic project, which has at least four characteristics. 1. We should form a development mode based on high productivity. 2. We should form a more balanced economic structure. 3. We should achieve a mid-to-high level of industrial technology. And 4. We should try to take the mid-to-high position in the value chain of the global division of labor system.

Mid-to-high level of economy cannot be easily realized. The most important way for us is to follow the concepts of "innovation, coordination, green, open and common sharing” proposed at the Fifth Plenum of the 18th CPC Central Committee, and formulate relevant strategies and policies to promote China's economy towards the mid-to-high level of development. Firstly, we should give full play to the leading role of scientific and technological innovation in all innovation projects. Secondly, while fulfilling our present tasks, we should take a forward-looking view and work hard to form a further structural balance in future development. Thirdly, led by the high-end manufacturing industry, we should strive to enhance the level of industrial technology. And fourthly, we should implement the development projects with the new requirements of the opening up strategy, and make efforts to enhance China's position in the value chain of global division of labor.


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