Xi’s Leading China Toward Stagnation

By David Fickling | Bloomberg January 12 at 7:00 PM

The ambition of China hawks in the Trump administration is to maintain American dominance by halting China’s economic rise. It’s strange that President Xi Jinping appears to be working toward the same end.

The risk for any economy approaching China’s level of development is that it gets ensnared in the middle-income trap. Once the low-hanging fruit of urbanization and industrialization have been plucked, countries tend to get stuck in second gear.

Latin America, the former Soviet Union and the largest Middle Eastern countries have never managed to close the gap with the U.S., Europe and Japan that opened up a century ago. The only nations that have really succeeded in making the transition have been petro-states, members of the European Union, and a handful of relatively small, export-oriented Asian economies — Singapore, Hong Kong, Taiwan and South Korea.

That immediately suggests a problem for China. One factor that probably drove the four Asian success stories was the size of the global market for their specialized exports relative to their populations, which led to a substantial net inflow of value-added per capita. Even after they opened up their economies, more populous nations such as Russia, Mexico and Turkey failed to achieve a comparable export-led growth spurt — a problem that should be an order of magnitude greater in China’s case.

To be sure, Beijing’s economic planners seem well aware of the risk. The Made in China 2025 program that has raised hackles in the West looks like nothing so much as an attempt to build a group of high-value export industries that can help the country hurdle its way out of the trap — one of the key characteristics of economies that have achieved the feat, according to a 2017 study for the Asian Development

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