Overcoming the middle-income trap: International experiences and China’s choice

ABSTRACT Overcoming the middle-income trap is the main task of China’s next stage of economic development. International experiences show that continuous innovation and industrial upgrading in an open market environment are the keys to overcoming the middle-income trap. An open market is a prerequisite for a high-income economy. The expansion of trade, investment, and exchange activities helps emerging economies absorb technology transfer and knowledge spillover from advanced regions, which ultimately enhance innovation capacity and promote human capital accumulation and domestic industrial upgrading. Therefore, China will need to continue promoting domestic market-oriented reform, strengthen the construction of its domestic market, and open up to a greater extent to create a strong internal institutional environment and an external market environment for innovation. These will ensure the successful transformation of China from a middle-income to a high-income economy.