Between poverty and prosperity: China’s dependent development and the ‘middle-income trap’.

Despite China’s rapid economic growth in the past three decades, Chinese officials and experts are increasingly worried that the country is slowly heading towards the ‘middle-income trap’. The fear is that China might suffer the same stagnation and turbulence as Latin American economies did in the 1980s and 1990s. Will China be able to avoid this trap? Building on the insights of world-systems theory, this paper argues that China’s dependent development, although enabling it to escape the ‘poverty trap’, is likely to bog it down in the ‘middle-income trap’. China’s heavy reliance upon foreign technologies and investment has harmful effects on its economy. Dependent development not only increases China’s economic vulnerability but also truncates domestic industries. To escape the trap, the Chinese state should play a more active role in shifting its growth model away from low-end commodity manufacturing to knowledge-based, high value-added activities. [ABSTRACT FROM PUBLISHER]