Structural transformation of China’s economy: Success or failure?

China needs to facilitate a structural transformation of its economy to avoid middle-income trap. This article explores historical experience of countries similar to China by economic development, that have gone through structural transformation, and studies possible options for China. Cases of Germany and Japan of the second half of 20 th century prove that China has good chances to avoid middle-income trap driven by total factor productivity and human capital growth. China may fall in a middle-income trap should the financial stability be undermined given highly leveraged economy.