THE MIDDLE-INCOME TRAP: A
PROVINCIAL COMPARISON BETWEEN
SHAANXI AND JIANGSU
OVERVIEW
What is MIT ?
MIT in China
Comparison between Jiangsu and Shaanxi
Natural conditions, resources, economic growth, economic structure, regional and
urban development, total factor productivity, and human capital
FACTORS TRIGGERING MIT IN SHAANXI
The resources are not a problem.
Shaanxi has total reserves values at 46T, whereas Jiangsu is valued at 900B
Shaanxi has a larger area at 205800 square km, Jiangsu has 107000 square km.
Both have enough resources when compared in terms of historical buildings,
tourism (more in Shaanxi), forestry etc.
FACTORS TRIGGERING MIT IN SHAANXI
•Water reserves are less in Shaanxi due to droughts and floods. More environmental calamities.
•Jiangsu has a more suitable location than Shaanxi- helps Jiangsu in trade as it’s a coastal region.
•Shaanxi does not have a good transport network compared to Jiangsu
•More light industries in Jiangsu-Light industry is an important source of expanding product exports. Light industry generally
has the characteristics of less investment, short construction period, fast capital turnover, and more accumulation, and is an
important source of national fiscal revenue
•More heavy industries in Shaanxi1.Since these industries tend to produce by products that both pollute the air and water, this might affect the birth and death
rate statistics.
2.They’re more capital intensive, hence less use of labour.
•Jiangsu is privatized whereas Shaanxi has more government controlled firms- less jobs available to the public of Shaanxi
•Shaanxi has a problem of talent outflow- since there less jobs available, and the ones that are, they are concentrated in a
few fields.
AOKI'S FIVE PHASE
DEVELOPMENT
MODEL
Phase
M-Phase
G-Phase
K-phase
H-Phase
PD-Phase
Characteristics
• agricultural employment > 80%
• low and stationary per capita income
• industrialization (initiated by the government, e.g., via subsidies)
• moderate growth of per capita income
• moderate structural change
• high growth of per capita income
• fast structural change (shift of the employment share from the agricultural to the industrial sector)
• “demographic gift” (increase in the share of labor force in total population)
• sustainable growth of per capita income (dependent on the continuing growth in output per worker in the indus-trial
sector, e.g., through TFP and human capital investment)
• demographic change
• growth is dependent on the occurrence of technological, socioeconomic, and demographic changes (necessary
to steadily increase TFP growth, labor participation, and the fertility rate)
SWOT ANALYSIS OF SHAANXI
Strengths
Weaknesses
1) Rich in Mineral resources
2) Abundance of tourist hotspots
3) Home to high quality Human Resources
4) Strong suit in education
5) Agricultural advantage
1) Lack of Transport services
2) Government owned industries
3) Problems on agricultural produce due to natural calamities
4) Shaanxi’s personal brands are not well known outisde the
country.
5) Location
Opportunities
1) Globalization and a chance to execute foreign trade in
in the International markets
2) Privatization
3) Increasing number of light industries
Threats
1) Brain drain and talent outflow
2) Loss of tourism
SWOT ANALYSIS OF SHAANXI
Strengths
Weaknesses
1) Rich in Mineral resources
2) Abundance of tourist hotspots
3) Home to high quality Human Resources
4) Strong suit in education
5) Agricultural advantage
1) Lack of Transport services
2) Government owned industries
3) Problems on agricultural produce due to natural calamities
4) Shaanxi’s personal brands arenot fwell known outisde the
country.
5) Location
Opportunities
1) Globalization and a chance to execute foreign trade in
in the International markets
2) Privatization
3) Increasing number of light industries
Threats
1) Brain drain and talent outflow
2) Loss of tourism
APPROACH TO TACKLE ISSUES AND GAIN
OPPORTUNITIES
•More government initiatives to increase privatization
1.Create jobs, hence Less talent outflow
2.Human Resources will be efficiently used
•Increase foreign trade- this can be done through the belt and road initiative
1.they have an abundance of forestry that can extract a wide range of production inputs, environmental goods,
food, fuel, medicines, household equipment, building material and raw materials for industrial processing.
2.Brands
•Create better and cheaper transportation methods to and from Shaanxi to increase tourism and make trade
easier.
•Increase the number of industries that effectively use the minerals that Shaanxi already has in abundance.
•Increase the number of Light industries
•Make barriers to entry in the province easier (Example- Hukou)
CLOSING STATEMENT
MIT is the result of an inability to take a long-term view of the best way forward for society as
a whole.
Avoiding the trap will take careful preparation and implementation over a decade or more.
Providing easier access to top-tier universities, forming fair, transparent and accountable
public institutions, building a culture of prudent risk-taking and a mindset of environmental
sustainability are not processes that happen overnight.
To reach Jiangsu’s rate of economic growth and hence get out of the MIT, Shaanxi has to
follow the following: Balance between heavy and light industries, focusing more on agricultural
based industries, easing barriers to entry, increase privatization and increase trade.
THANK YOU