The Study On The Function Of Crossing The "Middle-income Trap" By Urbanization

Since 2010, China’s per capita GNI is 4260$, since that china changed from "lower-middle income" economies to "upper-middle income" economies, which marks the country’s economic and social development has been entered a new phase. But with the reform goes further, various social problems have taken place evidently. For example, over-reliance on export-oriented economy, domestic demand was less dynamic; in terms of the city and country development, too much emphasis on development of big cities, but they ignore the coordination and promotion of small and medium cities and farmers, especially for the rights of landless peasants, during the economic development around the city with not solving the problem of large number of marginalized people, it will affect the balanced development between urban and rural areas and affecting social stability, which in turn affect the overall economic growth if we does not solve these problems. Therefore, to explore a development which fits Chinese economic is very conducive before the current requirements, and how to raise the slow economic growth rate is in a priority. From the experience since World War Ⅱ, the economic development throughout the world, we can see that although many countries through their own efforts to jump from middle-income countries to high-income countries successfully, but only a few countries had made it. The historical experience tells us that the development stage to the middle-income countries after the middle-income countries can enter the ranks of high-income countries is very important. If do not handle properly, the country will fall into the so-called "middle-income trap", some Latin American countries is a living example. The reason why many developing countries fall into the "middle-income trap" at this stage, mainly because of the contradiction between economic development and long-term accumulation of its past problems which do not handle properly, with the economic development lack of a new push force, the country will easily fall into the stage of stopping growth or slow growth. Therefore, to solve the contradictions that exist in the economic development and reduce the drag that inhibit the development of economic to insure the country break this "equilibrium" after the country entered the "middle income trap" and across the "middle-income trap" successfully.The actual relationship between urbanization and crossing the "middle income trap" is the same with urbanization and economic growth. This paper based on the research of previous people, analyzing the causes and manifestations of the "middle income trap", also using the Solow growth model to understand the relationship between urbanization and the "middle income trap". As the model gives the condition that all the savings have been transit into investment in order to achieve the steady economic development, and the current stage of China’s savings rate is very high, higher than Japan, South Korea and some other countries and regions which escape from "middle-income trap", and also higher than some Latin American countries which entered the "middle income trap". With our country’s current urbanization rate is far lower than Japan and South Korea and other countries. According to the current stage of economic development in China when its growth grow into bottlenecks and finding a new way to prove the economic growth is very important. The urbanization is a good option to assure a soft landing for the economy to achieve further growth in the economy. While in the process of urbanization we must increase more investment in infrastructure so that we can boost urban and rural residents’ consumer demand and investment demand which led to the growth of the national economy. This paper also uses graphics to analyze the process of how the urbanization promote the economic growth and to reveal while in the process of urbanization we need to prevent a "Trap in Latin America."Finally, Also the paper puts forward some suggestions and strategies to achieve economic growth which can improve per capita GDP, and then across the "middle-income trap" successfully into the ranks of high-income countries.