China’s Slowdown and the Myth of the Middle-Income Trap

Treść źródłowa

Source: https://data.imf.org/-/media/iData/External-Storage/Documents/2F78EE59F79143A7921E5E203D3AAA80/en/WEOApr2026all.xlsx Note: This excludes countries with less than 3 million people and major oil exportersFLASH: The Ministry of Finance (MOF) spent an estimated ¥5.5 trillion—about 1% of GDP—to keep the yen from getting weaker than ¥160, a line in the sand that it drew in 2024. Keep in mind that, at the time, the gap between ten-year government bond rates in the US and Japan was around 3.6 percentage points. Today, it’s around 1.9%. The narrower gap was expected to make the yen much stronger, but the opposite has happened. Even since it was clear that Sanae Takaichi would become Prime Minister, the yen has fluctuated between ¥152 and ¥160, mostly between ¥156 and ¥160. It’s clear that Tokyo does not want the yen weaker than ¥160; it is not clear whether it wants it much stronger than that. Takaichi has long been a proponent of a weak yen. As I’ve discussed before, if fundamentals drive the yen’s weakness, it would be hard for Tokyo to engineer a much stronger yen and keep it there, even if it wanted to.________________________________To hear the World Bank tell the story, the roots of China’s economic slowdown are that it is just one of 108 countries afflicted by a so-called “Middle Income Trap,” a trap that I think is mythical. In a 2024 report, the World Bank contends that, of all the nations that transitioned from poverty to middle-income status since 1990, only 34 have gone on to become truly affluent. Instead, says the Bank, they hit a wall when they reached a nomin…