I don’t think so. Just my view.
Read an article in Forbes entitled, “What Could Derail A Middle Class China?” This article starts out by asking what could prevent China from becoming a developed country and then sets out what usually prevents countries from reaching “high-income status”:
The experience of countries that failed to make the jump to high-income status suggest that their inability to innovate and upgrade can be attributed to three broad factors: (1) macroeconomic, political and social instability; (2) persistent inefficient allocation of resources; and (3) insufficient support to physical infrastructure and human capital development.
Though I agree with the above, I completely disagree with the way the article applies (or really fails to apply) these factors to China. The article lists the following three things as most likely to derail China’s path to riches:
1. Environmental Degradation. “These problems, if not tackled quickly, are likely to reduce life quality, hamper productivity, drive away investment and, eventually, dim China’s growth outlook.”
2. Increasing Cost of State-Owned-Enterprises. “SOEs may also contribute to fiscal risks, as both the state sector and local governments continue to face soft budget constraints, and become a source of social tension.”
3. Financial Crisis. “It remains an open question if China’s banks and its financial system more generally could withstand the shocks likely brought about by financial liberalization and opening.”
I minimize all three of these. Both Environmental degradation and the cost of SOEs can be overcome and even if that does not happen, I do not see those failures as enough to prevent China from becoming a wealthy nation. Any financial crisis will have a short-term impact.
No, at this point, what I see holding China back from developed status are far more systemic. I simply have doubts as to whether China can innovate enough to move from a country based on heavy industry for others to a country that innovates sufficiently to develop big time products/services/ideas so as to make China a 21st century economic powerhouse. I also am skeptical of its ability/desire to substantially improve the living standards of more than half of its poorest 900 million.
For more on China’s chances of escaping the Middle Income Trap, check out the following:
- Will China Escape The Middle Income Trap?
- China, Malaysia, Korea And The “Middle Income Trap.”
- Diversity Is Strength. Where’s China?
What do you think?