New set of drivers

Kuang Xianming, head of economic research at Hainan’s Institute for Reform and Development, said some countries fail to escape the trap because they are unable to adapt to new dynamics that require more sophisticated growth drivers.

The key for China to head off such a trap is to shift from reliance on investments and dividends brought by massive population and globalization to a new set of drivers led by the market mechanism, domestic demand and social development, where the potentials are yet to be tapped, said Kuang.

In light of China’s current economic picture, analysts say comprehensive reform is urgent, and major effort is requird to avoid systematic financial risks, rebalance the economy, and unleash growth potentials.

Action is already underway as China tries to restructure the economy: lending rates have been scrapped to further liberalize interest rates; the Shanghai pilot free trade zone is up and running; redundant administrative procedures have been slashed.

The leadership has reiterated its commitment to rolling out more reforms to upgrade growth.

In a few days, authorities will meet for the third plenum of the 18th Central Committee of the Communist Party of China and a comprehensive reform package is anticipated.

If significant reform policies are made and carried out in key sectors, China is very likely to see fresh economic impetus helping it vault the “middle income trap” and land into the ranks of high-income nations.

“Although growth is harder to achieve as economic volume expands and a population ages, China can still attain relatively fast growth through the more efficient use of human capital and production resources,” said Qiao Hong, suggesting China has the potential to attain annual growth of around 7.6 percent from 2011 to 2020.