Abstract The "middle-income trap" is a concept proposed by the World Bank. Its meaning is: a country will fall into such a dilemma after becoming a middle-income country: on the one hand, as labor costs rise, its exports

The international competitiveness of products will be affected; on the other hand, its industrial structure is not based on technological innovation.

As a result, such a country cannot compete with other developing countries nor with developed countries.

It can be seen that the "middle-income trap" does not refer to all the problems that developing countries (middle-income countries) encounter on the road to economic and social development or modernization, nor does it refer to a country's long-term inability to join the ranks of high-income countries.

In a certain sense, it is completely a false proposition to regard whether per capita GDP can reach 12,196 US dollars (or 12,276 US dollars) as a sign of whether we can escape the "middle-income trap".

As China's labor costs rise rapidly, the risk of China falling into the "middle-income trap" is increasing.

Therefore, China must intensify its efforts to transform its economic development model and promote the strategic adjustment of its economic structure as soon as possible by implementing an innovation-driven development strategy.

Keywords "middle-income trap"? Middle-income countries, labor costs, competitiveness, Latin America China In recent years, domestic academic circles have paid great attention to the "middle-income trap".

Type “middle-income trap” into Google’s search engine and you’ll get 1.2 million results.

However, when studying this topic, many scholars misinterpret the meaning of this concept and thus put forward some incorrect opinions.

This article attempts to start from the definition of the "middle-income trap", point out the deviations in domestic academic circles' understanding of this concept, and answer the crucial question of whether Latin America and China have fallen into the "middle-income trap."

1. What is the "middle-income trap"? Regarding the origin of the concept of the "middle-income trap", there is a common understanding in academic circles at home and abroad: it was originally proposed by the World Bank.

By searching the Internet, we found that the World Bank published a report in November 2006 on how East Asia should cope with the weakening global economy.

In this report, economists from the World Bank pointed out that "if middle-income countries are to prosper, they must take some different measures than in the past. This suggestion is consistent with the fact that middle-income countries are neither growing as fast as rich countries"

, not as good as poor countries.” These economists also believe that middle-income countries are caught between poor countries with lower wages and greater competitiveness and innovative developed countries.

But this report did not use the term "middle-income trap."

?In 2007, the World Bank published a research report entitled "East Asia's Renaissance: Perspectives on Economic Growth."

In this report, economists from the World Bank believe that due to the lack of economies of scale, middle-income countries in East Asia have to struggle to maintain their unprecedentedly high growth rates.

Strategies based on the accumulation of factors of production may lead to continued deterioration.

This consequence is bound to occur because the marginal productivity of capital will fall.

For decades, Latin America and the Middle East were middle-income regions, but they could not escape this trap.

This is the first time the World Bank has mentioned the “middle-income trap”.

In 2010, the World Bank published a research report titled "Strong Growth and Rising Risks."

In this report, World Bank economists argue that many economies in Latin America and the Middle East have fallen into a middle-income trap for decades.

In this trap, as high-yield, low-cost producers, they seek to remain competitive amid rising wage costs but are unable to move up their value chains or enter the expanding world of knowledge and innovation-based economies.

based product and service markets.

?Although World Bank economists failed to clearly define the exact meaning of the "middle-income trap" in the above three reports, we can draw this conclusion from between the lines: after a country enters the ranks of middle-income countries,

As per capita income increases, labor costs will rise, but its industrial structure and technological innovation have not shown significant improvement or progress.

As a result, it cannot compete with other developing countries with lower labor costs, nor with developed countries, leaving it in a dilemma.

In other words, the "middle-income trap" mentioned by the World Bank does not refer to all the problems a developing country encounters on its development path, but to a "dilemma" encountered after rising labor costs.

Some foreign scholars’ analysis of the definition of the “middle-income trap” may help us understand its true meaning.

For example, Peruvian scholar Luis Abugattas-Majluf believes that transitioning to skill-intensive, technologically advanced and more productive production activities is the only way for Jordan to cope with the "middle-income trap"

.

Vikram Nehru of the Carnegie Endowment for International Peace believes that only by vigorously developing manufacturing and reducing dependence on primary product exports can Indonesia avoid falling into the "middle-income trap."

?Japanese scholar Kenichi Ohno believes that the middle-income trap is the “glass ceiling” between the second stage and the third stage.