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Xingmin Yin

Fudan University, Shanghai

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What is an incentive for the ongoingdiscussion of middle-income trap?

Is it possible to define the fundamental

factors of China’s moving to middle-incomecountry?

How can the middle-class play a great role incountry’s global competitiveness? 

Can we analyze the trajectory of income percapita in terms of China’s comparative

advantage?

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What is a major feature of China’s

comparative advantage over the pastdecade?

It may be argued that the country’s hugepool of human resources and capital willgenerally move China along the path ofboth knowledge-intensive and capital-

intensive mode of production and growth.

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What is the term of middle income country?How to better capture it?

China made leapfrog from US$1042 per

capita in 2001 to US$7500 in 2014. It is better to discuss China’s income

growth under the consideration offundamental factors.

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2001 2009

Low income 430 509

Middle income 1,860 3,397

Low middle 1,230 2,321Upper middle 4.550 7,502

High income 26,510 37,990

China 1042 6,000 (in 2012)

7,500 (in 2014)

15,000 (in 2020)

35,000 (in 2035)

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Can China continue and evenaccelerate its economic growth andenter into the gate of high income

country by 2020?

A positive effect of economic growthon disposable income for China’s

households.

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0.0

2.04.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

1000

20003000

4000

5000

6000

7000

80009000

10000

11000

Per Capital Urban Wage Disposable Income in Urban Areas

GDP per capital/

Urban Wage

Disposable

Income per day

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There is sizable income rising in China in thepast decade.

Daily disposable income of more than 50

percent of urban population is in the higher$10 levels.

Rural areas also saw a very sharp increase inthe population earning $10 per person per

day. The prosperity to high income country can

only be built on the higher productivity.

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Education policies have sought to improvelabor quality to make schooling better servethe needs of the labor market, stimulate

the economy, and promote China’s globalcompetitiveness.

As education provision has expanded, thecomposition of enrollment has changed.

Schooling expansion in every level,particularly in higher education.

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Senior

Secondary

School

Junior

Secondary

School

1990 27.3 40.6

2000 73.2 51.2

2003 83.4 59.62012 87.0 88.4

? 95.0 95.0

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N. Of

College

Students,

10,000

No. of

Postgradu

ates,

10,000

No. of

Students

per100,000

1990 61 3 304

2000 221 13 723

2003 382 27 12982012 689 59 2335

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Promotion rate

Mass higher education movement

Subject composition of collegestudents

Overseas study

More measures:

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As the middle class grows it raisesinvestment in human capital, in turn, drivesnational economic growth.

The causality can also go the other way, withhuman capital accumulation (typicallyeducation) pulling more of the poor into themiddle class.

Increasing demand for education, combinedwith technological advances, is fuelling a risein income.

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China is making a great transition frommiddle-income toward an industrializedeconomy status as it intensifies its

innovation effort.Discussion on R&D intensity with special

reference to international experience.

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Country R&D

Persons

/million

R&D/

GDP

Ratio

Country R&D

Persons

/million

R&D/

GDP

Ratio

France 3496 2.05 China 1071 1.44

Germany 3532 2.54 2013 2000 2.08

Japan 5573 3.44 Indonesia 205 0.05

UK 4269 1.88 Malaysia 372 0.64

USA 4663 2.82 Philippines 81 0.12Korea 4627 3.21 Thailand 311 0.25

Singapore 6088 2.52 India 137 0.80

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By 2013, China’s R&D intensity remarkably

rose to 2.03 percent. As a middle-incomecountry, its R&D spending to GDP already

passed its Asian counterparts. In 2012, China graduated 250,000 scientists

and engineers with degrees at the master’s

level and above.

Against the backdrop of the R&D spendingof the middle income countries, China hasbegun to move to the high income country.

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These educational and technologicaldevelopments are likely to affect tradepatterns because of their impact on

country’s comparative advantage. How to analyze China’s trade performance? 

A rising sophistication in China’s exports

relative to countries with similar aggregateendowments.

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0

200

400

600

800

1000

1200

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Light Textile Machinery Miscellaneous

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R&D is highly concentrated. Nearly 85percent of R&D spending takes place in themanufacturing sector.

China’s industry labor productivityincreased from US$3,437 in 2000 toUS$10,439 in 2008, further to US$16,029 in2012.

The size of China’ manufacturing capacity. 

The case of industrial products.

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Industrial Labor, million 2003 2011 Growth Rate, %

Textiles 4.99 5.99 18.04

Steel 2.56 3.40 32.81

Transportation equipment 3.12 5.80 85.90

Electric Power 2.38 2.53 6.30Manufacturing industry 48.84 80.14 64.09

Industrial Products Growth Times

Yan, million tons 9.84 28.70 1.92

Rolled steel, million tons 241 886 2.68

Motor vehicles, million units 4.44 18.42 3.15

Electricity, trillion kwh 1.91 4.71 1.47

Output value, RMB trillion 12.74 73.40 4.76

In US$ trillion 1.54 11.63 6.55

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The capital-intensive industrialization involvedthe establishment of an extensive set of capital-intensive industries, including steel, chemicals,heavy machinery, electric and electronics,

automobile and civil aircraft industries. High returns from investing in relatively capital-

intensive technologies, with the support of R&Dspending, China has retained an enormous

achievement in its quest for economic efficiencyand rising income level.

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Changes of China’s comparative advantage. 

Among the middle-income countries, Chinahas been the only country where level of

R&D intensity has risen beyond 2 percentand the student new enrollment rate inhigher education for the same agepopulation reached 30 percent.

China’s rapid rising labor productivity has

been a key factor for income growth.

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THANK YOU!

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