Challenges to China after Becoming an Upper-Middle Income Country

Abstract

After more than three decades of economic reforms and opening-up, China has become the second largest economy in the world, after the United States of America. In terms of per capita GDP, China now is an upper-middle income country. According to the World Bank, China’s per capita GDP, measured in current U.S. dollars, increased from $1,274 in 2003 to $6,091 in 2012 and China’s ranking moved from 125 in 2003 up to 79 in 2012 (World Bank, 2014). Similar to many other middle-income countries, China faces significant challenges, including income inequality, regional disparity, rural-urban divide, food safety, environmental pollution, urban congestion, political corruption, and social disorder (Lu, 2011). Therefore, it is important for scholars to study the new challenges and provide insightful policy recommendations for China’s future development. This special issue collects five articles that focus on China’s income inequality, food safety, urban congestion, intellectual property right protection, and China’s transformation. The first article, “Empirical Analysis on the Marketization Process and the Urban Resident’s Income Gap in China,” by Heng Liu and Zhihong Zhao, examined the influence of marketization on income disparity. The marketization process in each province is measured by the market index from 1997 to 2009, developed by Fan, Wang, and Zhu (2011). Income disparity is measured by the Gini coefficient of urban residents’ income. The authors argued that China’s economic growth benefits from market-oriented reform but the income gap runs parallel with market-oriented reform. Therefore, it is important to understand the relationship between the marketization process and the income gap. Using data from 1997 to 2010, the paper found that China’s Gini coefficient of urban resident income increased from 0.22 to 0.31, a growth rate of over 42 percent. If rural residents were included, the Gini coefficient would become much larger. The paper concluded that the