Is China a Developed or Developing Economy?

On July 26， U.S. President Donald Trump asked his Trade Representative Robert Lighthizer to increase pressure on the World Trade Organization （WTO） to change how it designates developing members including China.

In a memorandum， he threatened if there was no “substantial progress” toward changing the special and differential treatment for developing members within 90 days， the U.S. would take unilateral action， including no longer regarding some members as developing economies and not supporting their joining the Organisation for Economic Co-operation and Development （OECD）.

Trump also took a shot at seven of the 10 wealthiest economies in the world as measured by GDP per capita on a purchasing power parity basis—Brunei， Hong Kong Special Administrative Region （SAR） of China， Kuwait， Macao SAR of China， Qatar， Singapore and the United Arab Emirates—all of which have developing member status under WTO rules.

In addition， he lashed out at Group of 20（G20） members like Mexico， the Republic of Korea （ROK） and Turkey too on their developing member status.

This time， Trump has targeted not only some specifi c economies， but also the WTOs definition of developing members. His complaint is that the WTOs special and differential treatment for developing members has damaged the global trade system and the trade body urgently needs reform. He has repeatedly threatened that the U.S. would withdraw from the WTO if the reform doesnt come through.

The question now is， what exactly is a developing economy？

What the others say

As a matter of fact， there is no fi xed defi nition that is universally recognized.

Going by the UNs list of Sustainable Development Goals， developing countries are those between developed and less economically developed countries， with their industrialization and human development index（HDI） lying between the two groups.

Besides， while assessing factors like livelihood， the GDP and per-capita income， developing countries are supposed to have high growth potential. However， compared with developed nations， they have a lot to improve， such as access to clean water， sanitation， health， poverty alleviation， education， energy security， and sustainable consumption and production. On this list， 136 UN members fall in the category of developing countries.

According to the UN Development Programmes Human Development Report， all countries and regions that fail to live up to the criteria for developed nations can be classifi ed as developing countries. As this concept is too extensive， it is further divided into categories like new industrialized countries， emerging markets， frontier markets and least developed countries.

According to the International Monetary Funds World Economic Outlook database， by October 2018， there were 154 developing countries and regions with 13 shedding the title in 2015.

Among the 154 developing countries and regions， new industrialized economies （Brazil， China， India， Malaysia， Mexico， the Philippines， South Africa， Thailand and Turkey） and BRICS members （Brazil， Russia， India， China and South Africa） are separately listed， defi ned as countries that have yet to reach the criteria for developed economies but far exceed the average level of developing economies.

The WTO has used a mixed version of all these concepts. Besides， countries like Cuba and the Democratic Peoples Republic of Korea， which are not on the IMF and World Banks lists of developing economies due to non-membership in the IMF， are also classifi ed as developing members.

Whats worth mentioning is that China is on the lists of developing economies of all these international organizations and their reports； only， it is placed among new industrialized economies or sometimes among major developing economies.

Developing economy criteria

Investopedia， a U.S. website of financial news and insights， and Canadas Bank of Montreal recently put forward a set of widely recognized thresholds to measure the status of developed economies.

First， their GDP per capita should be at least $12，000 （raised to $25，000 in sparsely populated countries）， calculated on purchasing power parity. Second， HDI should be not lower than 0.8. Conventional developed countries have their HDI at 0.85 or even higher than 0.9. Third， there should be a high level of industrialization， with an average lifespan higher than 70 or even 80， an infant mortality rate much lower than 10 per 1，000， a relatively high ratio of female employment and senior female officials in organizations， energy consumption that is higher than the world average and relatively high personal debt levels.

Measured by these indexes， some selfdeclared developing economies are actually developed ones， and vice versa. For example， Chile is listed among developing economies by many international organizations， with its GDP per capita standing at $22，145， average life expectancy at 75， infant mortality rate at 7 per 1，000， and HDI at 0.82. Its industrialization， female employment and education popularization all reach high levels. It actually can be designated a developed economy.

The ROK is a similar case， and the IMF has already placed it on the list of developed economies.

At the same time， several developed economies designated by some organizations， nations or themselves do not live up to the status， like Russia， Mexico， Qatar， Malaysia， Brazil， Argentina and Israel.

How about China？ Chinas aggregate GDP ranks second in the world， with its total energy use jumping to the first， average life expectancy reaching 75 years and infant mortality rate dropping to 9 per 1，000. However， the GDP per capita stood at $9，844 in 2016， a large number of people still live in poverty， and technological innovation is still at a relatively low level. Thus， China can be classifi ed only as a developing country， at least for the time being.

Despite rapid progress， Chinas HDI stands at 0.72， not only much lower than those of major industrialized countries like the U.S. （0.92）， Japan （0.903） and Germany（0.926）， but also lower than many developing countries like Mexico （0.78）， Turkey（0.76） and Malaysia （0.78）.

Although the HDI is a controversial index， it reflects the fact that despite its impressive achievements in the past years， China still has a long way to go before it can be designated a developed or industrialized country. It still has many barriers to surmount before it can really be called the worlds richest or second richest country.

Whichever criteria are followed， China is a developing economy. China does not stick to this identity because it wants to take advantage of the WTOs special and differential treatment for developing members， but it is how the country is recognized by the vast majority of the people on this planet. The U.S. demand that China be given developed nation status is unfounded.

A protracted attempt

The fact is that even before Trump， since the time of his predecessor Barack Obama， there were efforts to compel China to call itself a developed or industrialized member in a string of international economic and trade bodies like the WTO. There were even baits that the new designation would ensure Chinas entry in the Group of Eight and the OECD.

Why is the U.S. rushing to designate China a developed nation？ As Chad P. Brown， a senior fellow at the U.S. Peterson Institute for International Economics， said， by doing so， the U.S. and particularly Trump， hope to strip China of a series of preferential treatment policies granted to developing members under the WTO framework.