This article is intended for Institutional Investors (as defined in the Securities and Futures Act, Chapter 289 of Singapore) only and is not suitable or intended for persons who do not qualify as such.
We know what we are, but know not what we may be – William Shakespeare
China’s annual GDP growth has fallen from double-digit rates between 1980 and 2012 to around 7% since President Xi Jinping took office in 2013. Growth is now expected to fall below 6% in the coming years. This declining trend seems to vindicate warnings of the dreaded middle-income trap – the tendency of fast-growing developing economies to revert to a much weaker growth trajectory, and stagnate when per capita income approaches the upper bound of the middle-income range between USD6,000 and USD12,000 a year, according to the World Bank. China’s per capita income in 2018 was already USD10,200.
Economic growth is a function of the two factors of production – labour/population and capital – and a residual factor – productivity. When a country grows towards its production possibility frontier (PPF) which defines the size of the economy, diminishing marginal returns set in. If there is no growth in productivity, overall economic growth will stagnant and eventually decline.
 A production possibility frontier is a curve that shows all the possible combinations of output for two products that can be produced using all factors of production, where the given resources are fully and efficiently utilised.