SHANGHAI – It is widely agreed that economic development means more than GDP growth. As China is now learning, one does not guarantee the other. Unless China’s leaders upgrade the country’s growth strategy to stimulate technological progress and structural transformation, high-income status will continue to elude the world’s second-largest economy and most populous country.
To be sure, China’s growth strategy – powered by investment in infrastructure, a massive increase in low-cost manufacturing exports, and technology transfers – has led to some structural change. As labor and capital moved from low-productivity sectors and regions to high-productivity activities, resource allocation became more efficient, real wages rose, and the economic structure was upgraded.