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Through studying the mechanisms behind middle-income trap (MIT) and industrial policies (IPs), the study finds, by channeling technologies and providing other forms of support to achieve productivity growth, IPs may help industries upgrade and innovate, thus generating new economic growth for countries to avoid the MIT. By looking at policy trajectory and developmental bureaucracy in the East Asian Miracle countries, namely Japan and Korea, the study further discovers the interventionist nature of the states, and by implementing a wide range of industrial policies, the states successfully developed numerous cutting-edge industries, which saved them from the MIT. As one-third of the world’s economic engine, China is experiencing a growth slowdown after it reaches the middle-income level. The study finds that the diminishing productivity growth in China is very similar to the initial stage of the middle-income trap, and therefore poses the question of “Will China encounter the MIT?” By identifying the Chinese state as a hybrid of the “developmental state” and communist nation, the study was able to compare the IP trajectory of China with those of Japan and Korea. The result reveals that China has used most of the policy types that have been used by Japan and Korea. Finally, we examine China’s newest five-year plan; as it satisfies the policy prescription given by the World Bank and Asian Development Bank, it is also similar to Japan’s policy motifs before it reaches high-income status. Therefore, we propose the argument that if China can follow its plan promptly, and continue to develop based on its gradualist development strategy, it may avoid the MIT. However, we should consider the fact that China’s industrialization is only 35 years old, which is a relatively short duration when compared to the three centuries of volatile capitalism in the West.
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Ren, Tianfu, "The Middle Income Trap and Industrial Policy: A Study of Their Linkage and Experience in China" (2017). Senior Projects Spring 2017. 52.