The first of six strategic shifts laid out in China 2030 could be summarized as: more markets, less obtrusive government. Li Keqiang, who within a year would be anointed as China’s first premier with a Ph.D. in economics, was said to have shown “unwavering commitment” to the China 2030 project. Li, though, didn’t become China’s supreme leader. Xi Jinping did. The incoming Communist Party general secretary, an ideological purist with no comparable economics training, assumed much of the premier’s role in managing the economy. And weakening the party-state’s power to intervene has never been part of his agenda.

Wow, crazy that phd in economics would want more deregulation

Xi’s increased use of “common prosperity” in speeches this year — in tandem with the government’s regulatory barrage against technology companies and inveighing against excessively high earners — has been portrayed as a sign of his determination to reduce China’s income inequality and reassert core Communist Party values. It might just as easily be seen as impotent flailing against an inescapable fate. That’s because Xi’s approach has little chance of delivering the results he desires

Interesting proposition, let’s see why

The middle-income trap describes how economies tend to stall and stagnate at a certain level of development, once wages have risen and productivity growth becomes harder. Relatively few make the transition to high-income status. The history of those that have, such as South Korea and Taiwan, points to a need for the state’s role to retreat as markets advance. Ad hoc interventions by governments may work at more basic levels of development. At higher income levels, economies become too complex for command-and-control management by individuals. Systems are increasingly what matters. Rules that are transparent, predictable and fairly applied enable market forces to take over the job of directing economic activity, raising efficiency and allowing innovation to flourish.

And colonies, but we ignore that part

This inevitably implies some ceding of power by the rulers. It also potentially implies political change. South Korea and Taiwan both transitioned from authoritarian to democratic political systems as they became richer. The largest high-income economies are almost all democracies. Xi, a believer in the historic mission and preordained victory of the Communist Party, is far from receptive to such a message. The party has embraced markets, but from a position of superiority. Like laws, they are there to be used, when useful; the party remains supreme, above all.

Very democratic south korea btw, heard they even release samsung political prisoners

The real action is in institution-building: developing pension and social security systems; changing the hukou residential permits that discriminate against rural migrants; implementing a recurrent property tax; remodeling the system of land-use rights so that farmers get fair compensation when local governments appropriate their land for development. These reforms are necessary both to reduce inequality and to lay the foundation for further income growth. China has talked about such changes for years, and indeed China 2030 gives significant space to them. Yet progress has been scant to nonexistent in many areas.

That’s a fair point with inequality (especially hukou shit, jesus christ), but again west outside of nordics doesn’t have something to brag about here

“The answer has to be the politics,” said economist George Magnus, an associate at Oxford University’s China Centre. “As China’s home-made economic problems have mounted and the external environment has deteriorated sharply, I think there’s a plausible case to say that he’s doubling down on repression and control and ideology to strengthen the party’s position.”

Magnus, who devoted a chapter to the middle-income trap in his 2018 book Red Flags: Why Xi’s China is in Jeopardy, argues that in pursuing these policies and strategies, “China’s government will stifle incentives and innovation, and make it even more difficult to generate the productivity growth that all high-middle-income countries need to avoid the middle income trap.”

How is that working out?

If Xi succeeds in steering China into the high-income bracket without undertaking the institutional reforms that have accompanied the transition in other countries, then it would rewrite the rules of conventional economics and burnish the international standing of Beijing’s authoritarian governance model. Developed democracies have hardly demonstrated their superiority in this regard recently, having failed to reverse their own decades-long trend of widening inequality (even if disparities mostly remain far narrower than in China).

In fact, China is already on the cusp of gaining high-income status. Based on the World Bank’s current threshold and International Monetary Fund forecasts, the country should achieve that goal before 2025: neat graph here

Gaining admission to the rich-nations club doesn’t denote lifetime membership, though. It’s possible for countries to go into reverse and drop back into the middle-income category — just look at Russia. More important than an economy’s (somewhat arbitrary) classification at a point in time is the direction of travel

Which china seems to be traveling upwards?