👉China has attained various one-off “economic dividends” from the early 1990s till the outbreak of the coronavirus epidemic for about 25 years, driving its rapid economic development. For examples, the inflow of vast surplus labour and the corresponding low-cost labour supply because of rural-urban migration, relaxation of population and employment mobility controls, relaxation of restrictions on Chinese citizens travelling abroad and cross-border exchanges, general improvements of technology and skills related education, preferential trade because of the WTO entry, a large influx of various forms of foreign investment into the manufacturing and international trade, accessing the global IT-innovations in connection with the internet-related development, rapidly increasing the demand for durable goods such as automobiles and home appliances, almost starting from ground zero the commercialization of housing leading to the development of real estates everywhere, investments in infrastructure and urbanization, expanding public investment by all levels of government, accessing the supply of world technology at low cost (or even zero cost because of piracy, and the like). These economic dividends have taken place and have been reinforced within a short period, resulting in rapid economic development. This extraordinary-but-staged development has resulted from China′s implementation of economic reforms (partial abandonment of the planned economy) and policy refinements (but without political reforms).

👉Chinese rulers have not realized that the above economic development is an unsustainable-but-staged consequence of their policy manoeuvre. They have fallaciously believed that the “Chinese characteristics system” has formidable innate advantages (i.e., “one- party dictatorship” (一黨專政), “nation-wide system” (舉國體制) and other politico-strategy concepts) to create the above economic development, so this development process can continue to occur. They have not realized that since the early 1980s, the “Chinese characteristics system” (中國特色體制) (as an inductive concept of totalitarian politics) only pursues economic effects without economic efficiency (僅追求經濟效果沒有經濟效率). It is a system of systematic abuse and waste of resources against fundamental economic laws. The public projects promoted by the “characteristics system” almost always centre on the interests of the CCP regime’s existence, lacking viable input-output assessment, resulting in an astronomical waste of resources.

👉At the golden stage of economic development, China has not pursued systematic reforms of politico-economic and social structures, nor has it done enough to overhaul and revamp the public policies and management for “economic transformation” (經濟轉型). China still has no substantive integrity supervision, so officials who handle any project can enrich their pockets. There has been no substantive accountability system, so officials have vastly attempted to exaggerate the public construction or ended up unfinished; there has been no public opinion pressure, so officials are keen on inflated and unreasonable elephant projects to make up and show off their political achievements. China′s top rulers have a desire to implement world-class projects that have been exaggerated and wasteful (such as the high-speed rail system and the Xiongan New Area) to show off to the world that “China is awesome” (厲害了我的國). Moreover, the state has orchestrated the policies to have the entire society involved in the illusion of over-development of real estate and everyone getting rich.

👉China′s rulers have paid little attention to the abuse and waste of resources in the “characteristics system” and rationalized the political absurdity against economic laws by manipulating public opinion and autocratic controls. In the golden stage of economic development, China has recklessly pursued dazzling economic statistics, propped up the “one-party dictatorship” and “nation-wide system”, and deceived the domestic public and the international community. China′s rulers have never considered how to clean up the mess at the end of the “political bottomless” (政治無底綫) carnival. 

👉The economic achievements built over the years, no matter how wasteful, are included in the growth of national income——also provided to major international institutions such as the World Bank and IMF. The economic policies pursued by Chinese rulers have been immensely beneficial to themselves and local officials to achieve their immediate political aims (buying people′s hearts and minds). But the policies have undermined economic development and cannot withstand the test of economic laws. China has fallen into the middle-income trap resulting from the “characteristics system”.

👉The waste of resources in China′s development process mentioned above has also occurred in countries caught in the middle-income trap (e.g. Brazil, Argentina, Mexico and South Africa). However, these countries have electoral mechanisms, civil societies, NGOs, or facing the pressures and constraints of the international communities, and they could not have done it as outrageously and long-term as China.

👉China′s rulers have believed that the “characteristics system” will continue the rapid development process forever, without the need to implement the corresponding reforms in connection with “economic transformation” (which is equivalent to egocentrically setting the “characteristics system” itself to contain all the elements of economic transformation) and ignore the need for political reform. China′s rulers have faced the exhaustion of the “one-off” development “dividends” and have not amassed a fresh wave of “dividends” enough to transform the economy into another stage of development. They have insisted on implementing an outdated and anti-modernity political system, which could not resolve the long-term dilemmas of political, economic, and social intertwining complexities. They are trapped and helpless.

👉Before the epidemic outbreak (especially in 2018-2019), Chinese society was on the alert about political, economic and social incidents called “Black Swan” (黑天鵝) or “Grey Rhino” (灰犀牛). But the above incidents could only be caused by the absence of political, economic, and social reforms. These incidents are preventable. For example, faced with the “underground financial crisis” (地下金融危機), “real-estate-bubble crisis” (房地產泡沫危機), and “local-government debt crisis” (地方政府債務危機) that broke out in the past two or three years, the totalitarian system has always resorted to suppressing dissent, covering up the truth, spreading falsehoods, and misleading the public. China′s rulers have deliberately delayed governance and restrained their policy options and opportunities to resolve the above crises to avert falling into “the middle-income trap”.

👉From the end of 2019 to the present (for over two years), China′s rulers have dealt with the coronavirus outbreak, starting in Wuhan and surrounding towns and the global spread, in a mysterious and bizarre way. That has ignited an intense confrontation between the “characteristics system” of China and the world democracy (and now entered the Cold War). The above situation has created an exhaustive consequence for China′s economy. It is moving toward a “war-preparation economy”, binding with greater distortions in the utilization of resources. That will exacerbate China′s falling into “the middle-income trap”.

👉To redress the economic distress during the epidemic, China has not implemented substantive economic measures, related legal procedures, and other supporting operations. China has merely made use of emergency and fallacious methods such as “wrecking the EAST WALL to fix the WEST WALL” (拆東墻補西墻) and “fabricating dodgy reasons to justify hidden intents” (巧立名目), directly expropriating private wealth and quickly capturing resources. For example, by spreading the notions of “common prosperity” (共同富裕), “averting monopoly” (反壟斷), “tracking down tax evasions” (追查偷逃漏稅) and other means. The Chinese authorities have aroused populist sentiments to coerce those dazzling internet-related companies/net celebrities/movie stars/live-streaming businesses/any other parties or companies with surplus profits to surrender substantial incomes. China′s rulers have pushed populism to become increasingly violent and vulgar (including cheering for the wolf-warrior diplomacy and advocating the use of force against Taiwan) to build their political cohesion to escort the militarization of the economy. These actions would only exacerbate China′s fall into “the middle-income trap”.

👉The above development dilemma faced by China has also occurred in many other economies or countries that had fallen into the middle-income trap——in their specific ways because of their different national conditions. Only South Korea, Taiwan, Hong Kong, and Singapore (that is, the Four Little Asian Dragons) and a tiny number of economies or countries had overcome the middle-income trap, at the critical stage of development, by making substantial political, economic and social reforms and corresponding economic transformation.

👉The United States is the largest country that has successfully overcome the middle-income trap in the history of world economic development from ancient times to the present. During the critical period in the transition to overcome the middle-income trap (from the Civil War to the end of the nineteenth century), the total population of the United States increased from 32 million to 75 million—— that is, the total population of the United States in 1900 is virtually the same as that of China′s Hebei Province in 2020. In the history of world economic development, none of the economies or countries bound up with a total population of over 75 million has ever crossed the middle-income trap. About 120 years after the U.S. crossed the middle-income trap (from the beginning of the 20th century to the present), every country that has overcome the middle-income trap with a somewhat larger population (e.g., Japan, South Korea, Spain) had a much smaller population size compared to that of the U.S. in the same critical stage of development.

👉There have been far too many empirical cases to show that it has been enormously hard to overcome a great variety of obstacles to enhance the per capita labour productivity of an economy or a country with a large population (with middle income per capita) to every higher level to overcome the middle-income trap. It is closely related to a fundamental proposition and historical phenomenon. Every economy or country with a large population (with a medium per capita income) needs a greater degree of political determination to plan and implement the economic transformation but failed to do so. China has a population of 1.4 billion at present. It is equal to 20 times the total population of the United States at the stage of overcoming the middle-income trap. Has China worked hard enough to plan and implement the economic transformation to overcome the middle-income trap? NO. If China pretends to have implemented the economic transformation yet skipped it, would it be viable to do so? NO. See the following examples. China′s current population base of 1.4 billion is too large because it has implemented an ill-conceived and pendulum-style population policy since the 1950s. Yet, it is prematurely facing the rapid ageing of the population structure and the shortage of young and productive labour soon. China′s intergenerational social security system is fragmented and also impossible to sustain. China′s discriminatory policies are overwhelming, reaching all corners of life, such as “urban-rural dual structure” (城市-農村二元結構), “coastal-inland dual structure” (沿海-内陸二元結構), “party member versus non-party member dual structure” (黨員-非黨員二元結構). Such policy distortions and many others have continued to exacerbate the political, economic, and social inequality in many dimensions. The further improvement of per capita productivity (or per capita technical capability) in China′s huge labour endowment is now facing insurmountable obstacles. These situations have exacerbated China′s fall into “the middle-income trap”.

👉Today, the pandemic has reached its peak in many countries (especially in the major countries in Europe, America and Japan). They are about to achieve universal immunization and enter a period of economic expansion. Meanwhile, China is facing the counterattack of the global spread of the coronavirus caused by itself and has returned to an epidemic prevention blockade nation-wide that could prevail for quite some time. It will exacerbate China′s austere economic situation. China′s original “economic dividends” have largely been exhausted. But the “characteristics system” has become increasingly stubborn and unable to activate a fresh wave of “economic dividends” to take over the baton and continue to propel economic development. China′s rulers have projected a contradictory policy direction by promoting globalization in words but moving against globalization, including the surge of “internal circulation” (内循環) of the economy, downgrading the use of English, the “wolf warrior” diplomacy (戰狼外交), not afraid of the Cold War (不怕打冷戰), propaganda of “Changjin Lake-style” bloodshed (長津湖式血腥), the violent tendencies of populists. China has built up more rather than reduced the institutional constraints.

👉In the past 4-5 years, Chinese rulers have created an enhanced version of the “characteristics system”, entering the era of the one-party dictatorship in which Xi Jinping is the only one that matters. This step is equivalent to announcing to the Chinese public and the international communities that China has no will to pursue political reform to break through the structural development dilemma. China′s rulers have fallen deeper into the illusion of advocating unlimited power, greatness, and omnipotence of the totalitarian system, heightening the propaganda of the politico-strategies such as “THE EAST IS ASCENDING AND THE WEST IS DESCENDING” (東升西降), “THE WORLD IS FACING A GREAT CHANGE UNSEEN IN A CENTURY” (世界面臨百年未有之大變局). They have continued to strengthen the totalitarian rule and believe that it will create the next wave of “economic dividends” to achieve a higher level of economic development. They have gone many steps further—— “TO POINT THE DIRECTION FOR THE WORLD ECONOMY AND GLOBAL GOVERNANCE” (為世界經濟和全球治理指明方向), and “TO BUILD A GLOBAL COMMUNITY WITH A SHARED FUTURE FOR HUMANKIND” (構建人類命運共同體). These agendas are political delusions without historical evidence and a realistic foundation that would fail regardless of how hard they try. These attempts taken by China′s rulers to pursue their agendas will kick China right into the pit of “the middle-income trap”.

👉China′s academia has only pandered to the propaganda calibre and political machinations of the “characteristics system”, or written something innocuous, and lost the ability to do meaningful research and policy reference when the country has fallen into “the middle-income trap”. The public has largely been ignorant about this. China′s rulers have habitually manipulated the economic statistics to decorate the facade of the “characteristics system”, to hide the truth and instil falsehoods for the Chinese public and the international communities.

👉China has fallen into “the middle-income trap”, which will directly test the legality and legitimacy of the CCP’s rule of “FOLLOW THE PARTY FOREVER” (永遠跟黨走) and “THE POWER BASE BENEATH THE UNIVERSE IS ALWAYS RED” (江山只有紅色). China′s rulers couldn′t fulfil the grandiose ambition that their system is invincible and will always be effective. They are the candidate NUMBER-ONE for subverting their system.


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