"low Wage Trap" China's Economic Development

China's economy has kept a high increasing rate since the policy of reform and opening the door to the outside world was carried out .The GDP per capita has reached $1700 in China by the end of the year of 2005. In certain degree, this economic miracle takes the low Chinese labor cost as it's strut. However, is the low labor cost always beneficial to China's economy development when China's economy has reached a high level? Should the compensations be kept to the current level or be raised? The problems mentioned above have become not only a hot issue which is argued by scholars or governmental officials, but also a choice which have to be made by China's economy and society development. This paper states that when the industrialization in China reaches a high level and the shortage of social supply has basically vsnished, the low labor cost (or the low compensation) will have some negative influences to the economic development. Furthermore, these negative influences and the low labor cost will strengthen mutually and be the cause and effect of each other. I define it as"the trap of low compensations". The main purpose of this paper is to explore the condition and the mechanism which the trap of low compensations comes into being and to select the policy of shaking off the trap of low compensations. The analytic method combine the normative analysis and positive analysis, the qualitative analysis and quantitative analysis, the international lateral comparative analysis and the history longitudinal comparative analysis together. The eight chapters which are included in this paper are as follows :The first chapter: What's the trap of low compensations. This chapter explains the concept of the trap of low compensations and the mechanism and the condition which the trap of low compensations comes into being .The low compensation is beneficial to the economy in the initial period of economic development. but when the economy reachs the high degree of industrialization and the social effective demand becomes inadequate, the low compensation will have some negative influences to the economy development and the trap of low compensations will come into being. The trap of low compensations means that the low labor force cost and the low compensation will bring some negative effects to the economy when the economy reaches a high level, and these negative influences and the low labor cost will strengthen mutually and be the cause and effect of each other. The trap of low compensations takes the form of the trap of low compensations and inadequate effective demand, the trap of low compensations and low industrial structure, the trap of low compensations and the uneven regional economy and the trap of low compensations and the widening gap of the rich and the poor .