Seen as possibility in next 5-10 years unless reforms are carried out
China has a more-than-50-percent chance of slipping toward the middle-income trap in the next five or 10 years, said Lou Jiwei, the finance minister, during a conference held in Tsinghua University over the weekend, Chinese portal website Sina reported Saturday.
The high possibility is due to the country's aging population, said Lou. To avoid tumbling into the trap, China should carry out needed reforms which would help the country achieve an economic growth rate at 6.5 to 7 percent, Lou said.
To avoid the middle-income trap, Lou highlighted reforms in five sectors during Saturday's conference, including encouraging imports of agricultural products, accelerating reform of hukou (household registration) system, speeding up human resources reform, pushing rural land reforms, as well as tackling social security system-related issues, according to the Sina report.
The so-called middle-income trap is used by economists to describe the situation where developing economies' convergence to the development frontier comes to a halt once their income per capita reaches a middle-income level, economist Borko Handjiski said in a report posted on World Bank's website in September 2014.
China's working-age population started to drop from 2012, with an estimated decline of 3.5 million every year, Zhou Tianyong, economist from the Party School of the Central Committee of Communist Party of China, told the Global Times on Sunday.
"The shrinking labor force is mainly due to the aging population, in addition to China's low fertility rate, weighing on the growth prospects," Zhou noted.
Zhao Xiao, professor from the University of Sciences and Technology Beijing, echoed Zhou's view.
Zhao said that as the population aged over 60 years has already exceeded 200 million in 2013, "considering the lower mortality rate and one-child policy in China, 25 percent of the total population would be above 60 in 2023," Zhao told the Global Times on Sunday.
Zhao said besides tackling the aging population issue, structural reforms would help China avoid the middle-income trap in the next five or 10 years.
A total of 28 new countries have reached middle-income status over the last decade, with the gross national income per person ranging from about $1,005 to $12,075, according to a report published by the Organisation for Economic Co-operation and Development (OECD) in May 2012.
Still, only 12 countries have graduated into high-income country status during the period, according to the OECD, which suggested that at middle levels of income, economic growth and structural upgrading become more arduous, the report said.
