Question

Why have so many Asian economies struggled to escape the middle-income trap? What lessons can be learned from those countries that have already escaped the middle income trap? Has China escaped the trap? If so, explain how. [10 marks]

Answer 1

Middle income trap occurs when the developing countries fail to transition to the tag of developed countries. The growth rate slows down in the phase of middle income trap. These countries have to develop the technology to achieve the higher growth rate. Many Asian countries such as Japan and South Korea, have been successful in breaking the middle income trap. These countries have well-developed technology and manufacturing sector. Hence productivity is high in in these countries.

On other hand, many developing countries such as India does not have right level of technology to escape the problem of middle income trap. Furthermore, China is is growing very rapidly, it might stuck in middle income trap for the want of appropriate technology but China is developing technology rapidly to escape the problem of middle income trap. It is projected that over the next 5 to 10 year, China would join the league of developed countries. China is making major breakthrough in the developed of artificial intelligence. Artificial intelligence is going to dominate the world economies. Hence China would be leading country over the next few years.

China is going to become a major partner in the development of new technology. China is no longer a low quality goods producing country. Now it is being known for producing quality products.