Social Sciences in China (Chinese Edition)

No.3, 2019

 

Supply-Side Structural Reform in the Service Industry and Getting Past the Middle Income Trap

(Abstract)

 

Zhang Jianhua and Cheng Wen

 

The internal consumption and production structure of the service industry that now dominates the Chinese economy needs to be optimized. Introducing supply-side structural reform to improve the in-depth integration of advanced manufacturing and the modern service industry and promoting a strong domestic market is the key to stepping over the middle income trap. We use 1950-2010 data from 45 non-oil-exporting economies representing the structural evolution of the service industry worldwide to compare the Asian economies that have passed through the middle income trap with Latin American counterparts that remain stuck in this trap, as well as with the Four Asian Tigers, and thence proceed to construct a matched model that covers the consumption and production service industries and the supply of human resources, with an aim to identify the formative mechanisms and conditions for crossing over the middle income trap from the perspective of upgrading the structure of the service industry. The conclusion of our research is: Substantially developing the production service sector, raising the public service supply in order to cultivate the quantity and quality of human resources, and achieving a match between senior-level human resources and a knowledge-intensive service industry will propel the upgrading and transformation of China’s economic structure in the direction of high-quality development.