Cai Fang: This question is one of the unavoidable problems in economic research

Developing problems and growing pains

As of 2019, economies classified as low-income countries and regions still account for 11.6% of all 198 countries and regions with per capita GDP data, another 24.2% are classified as lower-middle-income economies, and 30.3% are classified as upper-middle-income economies, according to the World Bank's grouping criteria. That is, 66.1% of the world's economies are underdeveloped or developing. According to the different classification standards of the United Nations, the population defined as an underdeveloped economy accounts for 83.6% of the global population, of which the population of the least developed economy is defined as 13.6% of the global population.

Therefore, although development economics is now marginalized by mainstream economics, one of the unavoidable problems in economic research is still how to get rid of the poverty trap and achieve economic growth. However, in the developing world, more and more countries and regions belong to middle-income economies, and many of them have long hovered in the middle-income stage, which has become a landmark phenomenon in the world economy. Therefore, the research and development problem is not always the theme of getting rid of the low-income trap, and the "middle-income trap" has also become an attractive research topic.

Even if a country has crossed an artificially set high income threshold, for example, by the World Bank's grouping criteria, it is statistically considered a high-income country, and it does not mean that it can maintain the lifetime membership of the "club". After crossing the high income threshold, there is no shortage of precedents for a significant slowdown, stagnation or even regression in economic growth, and there are not a few countries that repeat the hovering in the middle-income stage. Therefore, the "threshold effect" should be an integral part or a special case of the middle-income trap.

Growing Pains: Challenges and Responses in China's Modernization Process, by Cai Fang, published by China Social Sciences Press

China's various risks and challenges are not necessarily unexpected events, but should be seen as a normal state of affairs with the development stage

China is at a critical juncture in crossing the high income threshold, and facing various risks and challenges is not necessarily an accident, but should be seen as a normal with the development stage. Among them, some of the challenges belong to the new requirements for the quality of economic development at a higher stage of development, or an inevitable extension of the logic of reform and development; some challenges reflect the long-standing development difficulties and blockages, and even have the nature of accumulating difficulties; some risks are very severe, if not effectively coped with, it will lead to impact events at this specific stage of development, and even delay the process of development.

Between the various types of risk challenges, there is an interrelatedness determined by internal logic, and the nature of the consequences will also be transformed from time to time and place. Therefore, reasonably determining priorities, correctly selecting the timetable and road map for response measures and implementation, timely resolving foreseen risks, and solving new challenges that continue to emerge in development are related to the success or failure of China's economic development in this period of important strategic opportunities. This book focuses on these developmental problems and growing pains, makes an economic analysis of the following risk challenges, and attempts to reveal the meaning of policy.

First of all, as China enters a higher stage of development, the downward trend of economic growth is certainly in line with the general law, but this does not mean that we only need to agree that this slowing growth rate is a new normal, and the challenge of maintaining economic growth within a reasonable range to achieve long-term sustainable development will naturally disappear. Economic theory and international lessons have shown that if economic development does not advance, it will retreat. At this particular stage of development, it is far more difficult to maintain the traditional growth momentum and tap new growth engines, especially to obtain the long-term sustainable source of growth of total factor productivity improvement, than in the period of high-speed growth.

Second, with the increase of economic development and per capita income levels, the task of providing residents with more, better and more equal public services is increasingly integrated with the task of investing in people throughout the life cycle as the stage of population transition changes, that is, the aging deepens. This combination is not only the proper meaning of promoting the common prosperity of all people and realizing the concept of shared development, but also an inevitable requirement for actively responding to the aging of the population. At the same time, it also helps to open up new growth points, both to maintain a reasonable potential growth rate and to prevent economic growth from being constrained by insufficient aggregate demand. Finding relevant challenges from the problems of development and the troubles of growth, and responding to them with new development concepts, is the requirement of the new stage of development.

Third, regional economic development differences, urban-rural disparities, and unequal income distribution among residents are the long-standing and difficult problems that plague China's economy and society. Although they have improved in recent years, according to the requirements of the concept of shared development, these imbalances still exist relative to the established goals, and some new characteristics have been formed. For example, from the perspective of regional differences, the long-standing imbalance between the east, the central and the west is increasingly manifested as a development gap between the south and the north. After a slight decline in the income gap among residents, there is a trend of decreasing the effect of improving income distribution. After the slowdown in the transfer of labor, social mobility also tends to decline compared with the period of rapid economic growth.

Finally, China's aging population will usher in a second demographic turning point in 2025 after experiencing the first demographic turning point in 2010, when the working-age population peaked and turned negative. If the first demographic turning point brings a supply-side impact, leading to a decline in the potential growth rate and a downward trend in the real growth rate, which has occurred and is being actively responded to with supply-side structural reforms, then the second demographic turning point will bring a demand-side impact, which may lead to the sustained constraint of total social demand on economic growth. On the one hand, the potential growth rate is still in the long run, and on the other hand, demand constraints may also lead to real growth rates not reaching the growth potential. Once this happens, it will be difficult to achieve the expected goal of China's economic development speed.

Confined to the author's field of study, this book does not seek to answer all the challenges facing China in the new stage of development toward modernization, but rather focuses on discussing economic growth issues related to demographic transitions, as well as the livelihood issues derived from them and closely related to policy logic. At the same time, the focus of the book is not to make specific policy recommendations on these issues, but rather to make theoretical analyses that provide the necessary international lessons. When trying to reveal the meaning of policies and make policy recommendations, they only focus on the relatively macro level, mainly discussing conceptual and principled issues.

(The author is Vice Chairman of the Agriculture and Rural Affairs Committee of the 13th National People's Congress, Member of the Standing Committee of the 13th National People's Congress, Chief Expert of the National High-end Think Tank of the Chinese Academy of Social Sciences)