China is a country in East Asia whose key industries include manufacturing, agriculture, and mining. With a 68.8% contribution to the country’s Gross Domestic Product (GDP), manufacturing is, by far, the biggest of the productions (Sawe, 2017). In the past decade, the country has surpassed the global leaders in this industry. Currently, China accounts for up to 19.8% of global production total (Richter, 2020). The nation’s mining sector boasts a 9.2% share of the world’s total mining market in such minerals as gold, copper, coal, and tin (Sawe, 2017). Lastly, although only about 15% of China’s land is arable, the country’s agriculture industry is strong enough to feed its enormous population (Richter, 2020). All these sectors are mainly capital intensive because they require a large amount of investment in their production. They also have a high percentage of fixed assets, including equipment, plant, and property.
China is at the risk of the middle-income trap (MIT) for a number of reasons. First, the country is experiencing a massive macroeconomic imbalance, especially after leaving the East Asian development model and allowing a rise in inequality (Islam, 2015). The situation has led to social tensions and declining capital efficiency, which may lead to the middle-income trap. Second, China has recently had a few financial crises due to unsound trade liberalization (Holland, 2017). For this reason, the country is expected to experience a growth lower than that of high-income economies or stagnation in the middle-income category, which may cause the MIT. Lastly, Yao (2015) notes that any economy which “plucks the low-hanging fruit of industrialization and urbanization” is likely to be trapped in the middle-income trap (para. 9). In recent times, China has enjoyed a sharp rise in its key industries: mining, agriculture, and manufacturing. Thus, this situation is likely to ensnare this East Asian country in the MIT.
References
Holland, T. (2017). The risk of the middle-income trap just increased for China. South China Morning Post. Web.
Islam, S. N. (2015). Will inequality lead China to the middle income trap? UN Department of Economic and Social Affairs (DESA) Working Papers. Web.
Richter, F. (2020). These are the top 10 manufacturing countries in the world. World Economic Forum. Web.
Sawe, B. E. (2017). The biggest industries in China. WorldAtlas. Web.
Yao, Z. (2015). How can China avoid the middle income trap? China & World Economy, 23(5), 26-42. Web.