China: "Happy with Crappy" and Avoiding the Middle Income Trap

Can China avoid the middle income trap? Hint: "Happy with crappy" won't work in high-value industry.

Poor (developing) countries tend to grow faster than rich ones. But most don't become rich. Instead, they get stuck in what's called the middle income trap. Link.

Japan avoided this trap, but they have one-tenth the population size that China has.

High value economies are founded on high-value manufacturing, and that means high-technology and capital intensive industry. And those industies are not big job producers. China needs lots of jobs for its 1.4 billion (!) people.

Can China avoid the middle income trap?

To do so, it needs to develop high-value industries, such as aircraft, big pharma, etc.

With products like aircraft and drugs, the approach of "happy with crappy," i.e., not messing around with the fine points but just moving ahead as fast as you can, won't work.

In this Op-Ed piece, Jim Fallows offers his views.

And below is Jim Fallows (an experienced China hand) talking about this: