1/7
"The main reason China has not built a stronger safety net for the elderly is that policymakers, fearing the economy might fall into the middle-income trap, prioritise growing the pie rather than sharing it, a government adviser told Reuters."
reuters.com/world/china/ra…
"The main reason China has not built a stronger safety net for the elderly is that policymakers, fearing the economy might fall into the middle-income trap, prioritise growing the pie rather than sharing it, a government adviser told Reuters."
reuters.com/world/china/ra…
2/7
The irony is that Beijing refuses to shift from supply-side support to demand-side support because it fears falling into the middle-income trap, but it may well be the failure to make the shift that constitutes the trap.
The irony is that Beijing refuses to shift from supply-side support to demand-side support because it fears falling into the middle-income trap, but it may well be the failure to make the shift that constitutes the trap.
3/7
Other countries whose "miracle" growth period was driven by massive investment also saw growth rapidly peter out once their economies reached investment levels above which they could no longer absorb additional investment productively.
Other countries whose "miracle" growth period was driven by massive investment also saw growth rapidly peter out once their economies reached investment levels above which they could no longer absorb additional investment productively.
4/7
In that case it requires rising demand to justify additional business investment, but rather than make the difficult institutional reforms needed to shift resources from investment to consumption, in almost every case the country doubled down on investment.
In that case it requires rising demand to justify additional business investment, but rather than make the difficult institutional reforms needed to shift resources from investment to consumption, in almost every case the country doubled down on investment.
5/7
So far, that's never worked. After years in which the debt used to fund investment grew in line with GDP, the declining value of investment showed up in a surging debt-to-GDP ratio, and this usually went on until policymakers decided, or were forced, to rein in debt.
So far, that's never worked. After years in which the debt used to fund investment grew in line with GDP, the declining value of investment showed up in a surging debt-to-GDP ratio, and this usually went on until policymakers decided, or were forced, to rein in debt.
6/7
Once that happened the economy usually got caught up either in a sharp, brutal contraction or it stagnated in "lost decades" of slow growth. This was the middle-income trap that an increasing reliance on investment was supposed to prevent.
Once that happened the economy usually got caught up either in a sharp, brutal contraction or it stagnated in "lost decades" of slow growth. This was the middle-income trap that an increasing reliance on investment was supposed to prevent.
7/7
The sooner China shifts towards consumption-driven growth, the sooner it will emerge from the trap, but the shift itself cannot help but be painful. That is why most countries historically have avoided it, and instead doubled down on investment.
The sooner China shifts towards consumption-driven growth, the sooner it will emerge from the trap, but the shift itself cannot help but be painful. That is why most countries historically have avoided it, and instead doubled down on investment.
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