Dialogue with Justin Yifu Lin: China becoming a high-income country will be an important milestone in human history
China News Agency, Beijing, March 3rd, title: Dialogue with Justin Yifu Lin: China's becoming a high-income country will be an important milestone in human history
China News Agency reporter Pang Wuji
In 2021, China's per capita GDP will exceed 80,000 yuan, or US$12,551 at the average annual exchange rate, exceeding the world's per capita GDP.
This figure is very close to the latest high-income country standard ($12,695) set by the World Bank in 2021, and even exceeds the high-income country threshold ($12,535) previously released by the World Bank.
Has China crossed the middle-income trap?
Lin Yifu, member of the Standing Committee of the National Committee of the Chinese People's Political Consultative Conference and dean of the Institute of New Structural Economics at Peking University, explained these issues in detail in an interview with a reporter from China News Agency recently.
One step away from high-income countries
The concept of the middle-income trap originated from the East Asia Economic Development Report (2006) released by the World Bank 15 years ago, which described that most countries experienced economic stagnation after reaching the middle-income level, and the income level was stagnant, making it difficult to achieve The high-income level leaps, and even falls back to the low-income level.
How is the situation in China?
Justin Yifu Lin pointed out that from the data point of view, China is only one step away from the World Bank's high-income country standards.
"I believe that in the next year, two years, or before the completion of the 14th Five-Year Plan at the earliest, it will definitely be possible to cross the middle-income trap," said Justin Yifu Lin.
He pointed out that if it is calculated at the current exchange rate of RMB against the US dollar, then it should be able to cross the threshold of US$12,695 to become a high-income country by the end of this year, but the threshold for high-income countries is calculated at the current US dollar, and the US dollar exchange rate will fluctuate, so , if there is some leeway, it may be next year, no later than 2025, and China will definitely become a high-income country.
This will be an important milestone in human history.
Justin Yifu Lin pointed out that the population living in high-income countries now accounts for about 16% of the world's population, and the Chinese population accounts for about 18% of the world's population.
So if China successfully crosses the threshold of high-income countries, the world's population living in high-income countries will more than double.
The average annual growth rate in the next 30 years will be about 4.5%
Justin Yifu Lin believes that to achieve the second centenary goal, China's economy still needs to maintain a relatively high growth rate this year and even for a long time in the future.
A reasonable growth target is for China's per capita GDP (measured at purchasing power parity) to be half that of the United States by 2049.
Justin Yifu Lin pointed out that this means that in the 30 years from 2019 to 2049, China's annual economic growth rate should reach 4.5%, "this is entirely possible."
Justin Yifu Lin divided these 30 years into two stages. One is from now to 2035. He believes that in this stage, China's economy is expected to achieve a growth rate of about 6%.
He believes that by taking advantage of the "latecomer advantage" and "change lanes and overtaking advantages", China still has an economic growth potential of 8% by 2035.
Achieving 6% growth under the 8% potential is an achievable goal with just hard work.
Second, from 2036 to 2050, it is believed that China's economy still has a growth potential of 6%. As long as it strives to achieve 4% growth, it will be able to achieve the goal of reaching half of the US per capita GDP (calculated by purchasing power parity) by 2049.
The key to achieving the goal of shared prosperity
To make the "cake" bigger is to achieve common prosperity for all people.
How does China approach the goal of common prosperity?
Justin Yifu Lin pointed out that the first is to develop the economy according to comparative advantages, because this can achieve the unity of efficiency and fairness at the same time in one distribution.
He explained that if it develops according to its comparative advantage, then the production cost of the enterprise can be reduced to the greatest extent.
If the economy is developed according to its comparative advantages, the greatest number of employment opportunities can be created.
One of the biggest differences between low-income groups and high-income groups is that the income of low-income groups mainly comes from labor income, while the income of high-income groups comes from capital gains.
If we develop according to comparative advantages, capital accumulation will be the fastest, and capital will gradually transition from relative shortage to relative abundance.
At this time, there will be a relative shortage of labor, and labor wages will rise very quickly, so the wages of low-income groups will rise faster. Conversely, the return on capital will be relatively lower, and the income growth rate of high-income groups will slow down.
This leads to a narrowing of the income gap.
After one allocation, if the enterprise develops according to its comparative advantage and the enterprise is competitive, there is no need for government protection and subsidies.
The more resources available for secondary distribution in the government's fiscal revenue, which can further narrow the income gap.
Finally, through some more appropriate tax arrangements to encourage some extremely high-income groups to participate in some social welfare activities for the third distribution.
This can not only make the cake bigger, but also solve problems in the process of economic development, and make income distribution more and more fair.
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