China aims to join 'high-income club'

Government unveils strategy it will use to achieve wealthier World Bank status

China will strive to reach the "high-income club" by 2020, a senior official said on Wednesday.

Speaking at a news conference to announce the beginning of work on the 13th Five-year Plan (2016-20), Xu Lin, director of the department of development planning of the National Development and Reform Commission, said the government hopes implementing it will allow China to approach the high-income threshold under the World Bank's standard.

"If we do better, hopefully we can enter the high-income club," Xu said.

The World Bank classifies countries by their per capita gross national income. Countries with a per capita GNI of more than $12,616 are categorized as high-income countries.

With a $5,720 per capita GNI in 2012, China is categorized as an upper-middle-income country by the World Bank. The figure for 2013 is not available yet. China's per capital gross domestic product in 2013 was about $6,800.

This is the first time the Chinese government has announced a timetable for raising its income status. Previously, it set a target of becoming a "moderately well-off society" by 2020. But that is a vague concept that is poorly understood in the West. At a key conference in 2012, the Communist Party of China pledged to double its GDP and per capita income by 2020 from its 2010 figures.

International experience, however, showed it to be a rough, if not turbulent, journey to make that leap.

Except for a few small economies, only Japan and the four "Asian tigers" (South Korea, Taiwan, Hong Kong and Singapore) have made their way into the high-income club over the past 30 years.

Many Latin American countries became upper-middle-income countries as early as the 1960s and '70s, but they are still knocking at the "high-income" door.

The phenomenon is so entrenched that the World Bank coined the term "middle-income trap", in which rising economies lost their traditional advantages in labor and land cost, and failed to get new advantages with which to enter the higher echelon. Many economists doubt whether China, facing the same challenges, could break out of that trap.

"Without innovation and the makeover of the economic structure, it would be impossible to realize that," Xu said. "The country could linger in the 'middle-income trap' indefinitely."

This is why the government will put new emphasis on innovation and structural upgrading in the coming Five-year Plan, he said.

This is evident in the 25 subjects on which the NDRC has solicited opinions in preparation for the making of the plan.

Many of the subjects are related to the effort, such as the forces of economic transformation and upgrading, information technology and education modernization.

The government also elevated the role of the market. Xu Shaoshi, chairman of the NDRC, said earlier that the plan will avoid touching on competitive sectors.

"In those competitive sectors, it is the market players that are having their impact. The government could not make a difference even if it made a plan," Xu Lin said.

Wang Ge, a researcher with the Academy at the China Development Bank, said China has almost used up its dividends from previous reforms and cheap factors (labor, land and capital). To achieve a high-income status, China must overcome five "traps" - those of backward institutions, social inequality, delayed technological innovation, overreliance on overseas capital, and market and ecological meltdown.

FACT BOX

·While leaving many sectors to market forces, the new plan will add more binding indicators to be managed by the government. For example, the 12th Five-year Plan has 14 binding indicators, such as energy consumption per GDP unit and share of alternative energy in the energy consumption mix.

·The current "strategic emerging industries" will not be changed in the next plan, and more will possibly be added. There are seven such industries now, including high-end equipment manufacturing, new energy and new materials.

·The 13th Five-Year Plan will put more emphasis on how the coastal regions can transform and upgrade their economies. Without such transformation, there will not be a transformation in the national economy.