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Volume 3 Number 4

Economics and Research Department

CONTENTS


1 Avoiding the Middle Income
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the PRC
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Forthcoming
12 Asian Development Review
Volume 30 Number 1

OctoberDecember 2012

Volume 3 Number 4

FEATURES

Avoiding the MiddleIncome Trap: Policy




  
Juzhong Zhuang, Paul Vandenberg, and Yiping Huang*1
The Peoples Republic of China (PRC)s economic performance over the past
three decades has been phenomenal. Annual GDP growth averaged 10% and
per capita income increased by a factor of 13 in real terms. Growth has led to

  

 

 

 


 



 
 


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(Table 1).

Table 1 Selected Development Indicators for the PRC


Per capita GNI, current $
Per capita GNI, current PPP$
Per capita GDP, 2005 PPP $, % of population
Poverty headcount ratio at $1.25 a day (PPP), % population
Poverty headcount ratio at $2 a day (PPP) % of population
Life expectancy at birth, years
Under-5 mortality rate, per 1,000
Gross secondary enrollment, %
Gross tertiary enrollment, %

1980
220
250
84
98
67
65
52
1

1985
280
500
55
69
93
68
54
38
2

1990
330
800
110
60
85
70
48
38
3

1995
530
1,480
253
54
74
70
43
52
5

2000
930
2,340
409
36
61
71
33
62
8

2005
1,740
4,090
685
16
37
72
25
73d
19

2011
4,930
8,430
1,313
13
30
73
18
81
26f

Source: Cited in Zhuang et al. (2012), p. 2.


Basic data from World Development Indicators Online, World Bank (accessed July 2012).

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*1 Juzhong Zhuang and Paul Vanderberg are Deputy Chief Economist and Senior Economist, respectively,
of the ADB. Yiping Huang is a Professor of Economics at Peking University.






 


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12 The middle-income trap is a phenomenon where a countryafter


reaching middle-income statusexperiences a significant moderation
in growth: on the one hand, it cannot compete against low-income
countries at low wages; on the other hand, it cannot compete with
high-income countries on innovation and higher value productionit is
trapped between the two.






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Gini coefficient of per capita household income was 0.491 in 2008
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Economics Officer, respectively, of the ADB.

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the School of Economics, University of the Philippines, and Maria
Socorro G. Bautista is Senior Economic Advisor, Asian Development
Bank.

Jan Hatzius, Peter Hooper, Frederic S. Mishkin, Kermit L. Schoenholtz,


and Mark W. Watson 2010 Financial Conditions Indexes: A Fresh
Look after the Financial Crisis. NBER Working Paper No. 16150.
Cambridge, Massachusetts: National Bureau of Economic Research.






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Figure 1: New FCI for Japan (first principal component)


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0
1

1980Q4
1981Q3
1982Q2
1983Q1
1983Q4
1984Q3
1985Q2
1986Q1
1986Q4
1987Q3
1988Q2
1989Q1
1989Q4
1990Q3
1991Q2
1992Q1
1992Q4
1993Q3
1994Q2
1995Q1
1995Q4
1996Q3
1997Q2
1998Q1
1998Q4
1999Q3
2000Q2
2001Q1
2001Q4
2002Q3
2003Q2
2004Q1
2004Q4
2005Q3
2006Q2
2007Q1
2007Q4
2008Q3
2009Q2
2010Q1
2010Q4
2011Q3

Index

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FCI

GDP growth (%), rhs






 


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BOOKS/REPORTS

ASIAN DEVELOPMENT

Outlook

Supplement
December 2012

Data is mixed, but Asia continues steady


economic growth
z Mixed third quarter data broadly support the
forecasts in Octobers Asian Development Outlook
2012 Update (Update) for developing Asia. With
downside developments slightly outweighing
positive events, this Supplement shaves the growth
forecast for the region by 0.1 percentage point to
6.0% in 2012 and to 6.6% in 2013.
z The October rebound in industrial production in
the Peoples Republic of China (PRC) likely signals an
end to the third quarter soft patchthe economy
should expand as anticipated in the Update: 7.7% in
2012 and 8.1% in 2013. However, with the continued
slowdown in the other East Asian economies,
growth in East Asia is slightly revised from 6.5% to
6.4% in 2012 and from 7.1% to 7.0% in 2013.

Major industrial country outlook


Recent data releases in the major industrial economies
of the United States (US), euro area, and Japan are
mixed. The third quarter gross domestic product (GDP)
growth for the US and euro area came up stronger
than anticipated in the Update, but Japans figure is
significantly weaker. All in all, as 2012 winds down,
overall economic activity in these countries remains
weak. For 2013, despite some downward adjustment for
the euro area, the GDP growth forecast for these major
industrial economies remains generally unchanged.
Compared with the Updates October forecast, 2012
is expected to be slightly stronger while 2013 will be
slightly weaker (Table 1).
Table 1. Baseline GDP growth (%)

z Indias economy continued to show weakness in the


third quarter. Anemic industrial production as well
as consumption and investment point to sluggish
growth in the coming quarters. Indias growth
forecast is revised from 5.6% to 5.4% in fiscal year
(FY) 2012 and from 6.7% to 6.5% in FY2013.
z A strong third quarter lifted prospects in Malaysia
and the Philippines, boosting 2012 growth forecasts
in the ASEAN 5 from 5.6% to 5.9%.
z Commodity price pressures have been relatively
benign; developing Asias inflation is expected to
hover around 4%.
ADBs Regional Economic Outlook Task Force led in the preparation
of the revised outlook for this ADO Supplement. The Task Force is
chaired by the Economics and Research Department and includes
representatives from the Central and West Asia Department, East
Asia Department, Pacific Department, Office of Regional Economic
Integration, South Asia Department, and Southeast Asia Department.

2011

Major industrial economiesa


United States
Euro area
Japan

1.2
1.8
1.4
-0.7

2012
2013
ADO Revised ADO Revised
2012
2012
Update
Update
1.1
1.9
-0.6
2.3

1.2
2.2
-0.4
1.7

1.5
2.1
0.5
1.6

1.3
2.1
0.2
1.6

a Average growth rates are weighed by GNI, Atlas method (current US dollars).

Sources: Asian Development Bank. 2012. Asian Development Outlook 2012


Update; and ADB estimates.

The second estimate for third quarter 2012 from


the US Bureau of Economic Analysis shows GDP
expanded 2.7% at a seasonally adjusted annualized
rate (saar). This was above market expectations and
considerably better than the previous quarters growth
of 1.3%. Higher private and public consumption
accounted for much of the third quarter growth.

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Volume 30

Number 1

Modes of Collective Action in Village Economies: Evidence from Natural


and Artefactual Field Experiments in a Developing Country
Yasuyuki Sawada, Ryuji Kasahara, Keitaro Aoyagi, Masahiro Shoji, and Mika Ueyama

Leading Dragon Phenomenon: New Opportunities for Catch-up


in Low-Income Countries
Vandana Chandra, Justin Yifu Lin, and Yan Wang

Investing Overseas Without Moving Factories Abroad: The Case of Chinese


Outward Direct Investment
Yiping Huang and Bijun Wang

Urbanization and Inequality in Asia


Ravi Kanbur and Juzhong Zhuang

ADB Distinguished Lecture


Renminbi Internationalization: Tempest in a Teapot?
Barry Eichengreen

 
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The Political Economy of Policy Reform: Insights from Southeast Asia


Hal Hill

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Trends and Impacts of Real and Financial Globalization in the Peoples


Republic of China and India since the 1980s
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with relevance to Asian development:

  
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