I think China will become a high income country this year (the 2025 data release should July 1st 2026). The RMB is also appreciating at a decent pace against the USD and will hit ~7.05 RMB to 1 USD by the end of this year (it was 7.3 at the beginning of 2025) so that should contribute to China getting over this threshold (although this is more of a cosmetic threshold at this point).
Chinese Economics Thread
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I think China will become a high income country this year (the 2025 data release should July 1st 2026). The RMB is also appreciating at a decent pace against the USD and will hit ~7.05 RMB to 1 USD by the end of this year (it was 7.3 at the beginning of 2025) so that should contribute to China getting over this threshold (although this is more of a cosmetic threshold at this point).
Why is anyone still talking about the middle income trap - China will get to high income status, period.
The real debate right now - with respect to the points I've made wrt reflating the economy / reforming so you have national unified market / getting rid of involution / formalizing/regulating subsidies / enhancing legal protection is about trying to move the ceiling from 20K USD/capita to 30k USD/capita.
The real debate right now - with respect to the points I've made wrt reflating the economy / reforming so you have national unified market / getting rid of involution / formalizing/regulating subsidies / enhancing legal protection is about trying to move the ceiling from 20K USD/capita to 30k USD/capita.
Agreed, the standard definition of the middle income trap is that a country's per capita income stagnates because the country can no longer compete with low-wage countries and also does not have the high-tech industries to compete with the high income countries.
Both false in China's case, as the low-wage industries are being moved to China's hinterland to develop the Western provinces. Also it is plainly obvious that China can compete in high-tech industries such as EVs and renewable energy.
China can "escape" the middle income trap just by letting its currency appreciate. Right now its heavily depreciated.
A 20% appreciation in currency will give a 25% boost to GDP, and GDP per capita, taking GDP per capita from ~14000 to ~17500.
I'm doing everything on a constant currency basis but yes that is one method. The real likely scenario is that the USD will depreciate as the Fed continues to print and the market starts questioning Fed independence. The pièce de résistance would be if the Fed Chair was concurrently the Treasury Secretary.
This is what I wrote back in 2023, and it looks like we're on track for the 5% growth trajectory (likely to slowdown to 4.5% by say 2027/2028)
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China has already escaped the Middle Income Trap. The term is also a very bad fit for very large economies that have a much greater diversity/gradients of economic development. People who think of South Korea as a very advanced country, haven't been to rural areas in Korea. Or Ireland.
The term is simply not applicable to China.
You don't have to subscribe to Glenn's hyper-optimism, but his work on really charting and visualizing the development and current status of China's growing middle-class puts the idea of "Middle Income Trap" to rest. Western economists really only care about one specific tranche of China's population as a their proxy for China's level of development, the upper-middle class, a very successful and sophisticated cultural/professional elite that's arguably been the hardest hit by recent economic developments. Their size, vibes, and general well-being is what informs the majority of Western punditry. Humorously, the women of this cohort are probably who "journalists" like Lingling Wei talks to.
Wages are growing, prices are falling, this increases income. It's not rocket science.
