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China Daily Website

Urbanization is driving force for economic growth

Updated: 2012-12-24 21:52
( chinadaily.com.cn)

According to a report from the World Bank, only 13 out of 101 middle-income economies in 1960 entered the club of higher-income economies in 2008. China's Hong Kong and Taiwan, South Korea, Japan and Singapore are five of the 13. China should draw lessons from the five to overcome the "middle-income trap", says an article in 21st Century Business Herald. Excerpts:

China should also explore its own path according to its national conditions to avoid the trap.

Population, capital and productivity are the three crucial factors related to economic growth.

The low-cost labor force, which contributed about 10 percent of China's economic growth over the last 30 years, will not be China's advantage any more. China urgently needs to divert its limited capital to cash-thirsty real economies to improve its total productivity, which is of vital importance for China's economic growth in the next 10 years.

The new leadership of the Communist Party of China has already sent a clear message that they will improve the capital's role in enhancing China's productivity through various reforms.

Experience indicates that economic growth will slow down for a certain period of time before its growth model is transformed to increase the efficiency of production. The turning point appeared in 1973 in Japan, 1986 in South Korea and now in China. But both Japan's and South Korea's income level and urbanization rate were higher than China's is today. It means China has more potential to maintain high-speed growth for at least another 10 years.

It is time now for the Chinese government to design the proper path and mechanism to translate these opportunities into real economic development step by step.