After a miraculous economic growth, spurred by the Beijing Consensus, China is now facing a slowdown. This book deals with the interesting issue of the middle-income trap—the phenomenon of the rapidly growing economy of a country stagnating at the middle-income level—in the context of China. It also discusses China’s limitations and future prospects, especially after the onset of a new “cold war” between China and the US, and in particular whether it would fall into the “Thucydides trap,” the conflict between a rising power and the existing hegemon. This book plays around three key terms, the Beijing Consensus, the middle-income trap, and the Thucydides trap, and applies a Schumpeterian approach to these concepts. It also conducts a comparative analysis examining China from an “economic catch-up” perspective. Economic catch-up starts with learning from and imitating a forerunner, but a successful catch-up requires leapfrogging, which implies a latecomer doing something different from, and often ahead of, a forerunner. Technological leapfrogging may lead to technological catch-up, which means reducing the technological gap, and then to economic catch-up in living standards and economic size. This linkage between technological and economic catch-up corresponds exactly with a similar linkage between the Beijing Consensus and escaping (or not) the middle-income and Thucydides traps. The book concludes that China’s successful rise as a global industrial power has been due to its strategy of technological leapfrogging, which has enabled it to move beyond the middle-income trap and possibly the Thucydides trap, although at a slower speed.
Middle-Income Trap in Emerging States
