China's economy grew to more than $14 trillion in 2019, continuing to close the gap with the $21-trillion U.S. economy, but the key takeaway from the National Bureau of Statistics report was that its per-capita GDP hit $10,000 for the first time.

According to a 2018 World Bank report, there were 1.6 billion people with per-capita GDP of $10,000 or above globally. Now, China's achievement will nearly double that number.

The $10,000 milestone, released as part of China's official 2019 economic data on January 17, is an indication that productivity and consumption driven by higher salaries have improved in recent years and is even more remarkable for a country with 1.4 billion people.

When I first arrived in China in 2002, the GDP was $1.4 trillion and per-capita GDP was $1,100. This was only a year after Jim O'Neill of Goldman Sachs coined the term BRIC to describe the rising economies of Brazil, Russia, India and China and the year that China became a member of the World Trade Organization.

China has achieved a rate of national and personal economic growth in less than 20 years unparalleled in history. By almost any measure of comparison China has outperformed its BRIC mates and virtually every other country in the world in producing new wealth for its citizens.

This announcement will be met with inevitable and somewhat justified concerns about China falling into the dreaded "middle-income trap" (MIT). The theory is that once a country reaches a middle level of prosperity (having risen rapidly from low-income starting points), that income and economic growth get trapped at that level and can or will not catch up with more developed economies.

While there are examples that give credence to this theory, the examples of other BRIC countries are useful, as well as examples of economies that continued to grow beyond the MIT like the Republic of Korea.

I am more partial to the idea that the MIT is not so much a trap, but stagnation resulting from bad economic policies and choices, complacency and an inability to go global with a country's products, services, soft power and economic sectors, combined with corruption and sometimes unexpected global political and economic crises.

In other words, the trap is not lying in wait for countries trying to improve their people's standard of living, but rather it's often a self-inflicted wound resulting from short-sightedness and complacency, exacerbating the things that are out of a government's immediate control.

I don't believe China is a candidate for the MIT. Quite the opposite, I believe the Chinese economy will continue to grow and eventually surpass the U.S., while Chinese per-capita income will continue to rise.

Extensive impact

I have identified five major effects that this milestone is having on China and the world.

Economic diversification. With more disposable income, Chinese consumers are spending their money on a wider range of products and services. People are spending on everything from entertainment to real estate and a mind-boggling array of consumer products. This has had the effect of building industries outside manufacturing and spreading the wealth to multiple sectors. In the end, a more diversified Chinese economy is a healthy and sustainable economy.

Global economic growth. Chinese people are making their impact felt on a global scale. China currently accounts for a higher percentage of global economic growth than any other country. As it transitions to a more consumer and service-oriented economy, its citizens are becoming an important part of the economic health of companies and institutions the world over. Whether enrolling in foreign universities, buying real estate, spending on luxury goods or tourism, or establishing new businesses, Chinese people, who have and spend more, are benefiting the entire world.

Innovation. With more spending power comes more demand for products and services that create a happier, healthier and more productive life. There is a virtuous cycle in China today whereby innovation and technology are improving living standards, while improving living standards and expectations are driving further innovation. This produces new ideas, products and technologies that further GDP growth, which spurs per-capita income.

The best and the brightest. The fuel for economic growth is the intelligence, ambition and dreams of a people. Increasingly, China is producing some of the world's most sophisticated entrepreneurs, engineers, digital commerce and environmental industry executives and startups. Most Chinese students educated abroad are returning home to open businesses, attracted by higher salaries and better opportunities.

Promises kept. For several decades, it has been the government's stated goal to build a moderately prosperous society. This target was necessary to become a fully developed economy by 2050. Passing the psychological and symbolic threshold of $10,000 gives President Xi Jinping an important victory at home and abroad in promoting the Chinese dream.

Continued income growth

I have also listed three reasons why China will continue to outpace most of the world in per-capita growth over the next 10 years.

Trade. The World Bank defines high-income countries as those with over $12,000 in gross national income per capita. It is widely believed by Chinese economists and officials (as well as many outside China) that this mark would have been reached in 2019 if not for the two-year trade friction with the U.S. With a phase-one trade deal signed on January 15 between China and the U.S., tensions have eased and a new foundation for trade has been put in place. That said, the conflict was a bitter lesson for China, and it will redouble its efforts to increase trade relations with Europe, Asia, South America and Africa, which should have the effect of spurring economic growth and per-capita income.

Technology and digital commerce. If there was any doubt about it, 2019 proved to be the year that China emerged as the only rival to the U.S. in the development of commercial, telecommunications and retail technologies. China is now a legitimate center of technological and scientific innovation. From 5G technology, to the most advanced retail technology and e-commerce ecosystem in the world and the most popular new social media app in the world (Douyin/Tik Tok), Chinese innovation is now supercharged and will be a key driver of new national and personal wealth over the next 10 years.

Science, technology, commerce and engineering are the new pillars of the Chinese economy. The country is also leading the world in the development of e-commerce, digital commerce and the New Retail model. Giants, such as Alibaba, JD.com, Tencent, Kaola, Pinduoduo and Baidu, are creating an economy based on the digital transformation of how China and the world make, move, market, sell and buy everything. China's digital super consumers have created another virtuous cycle of innovation>consumption>innovation.

Production. Manufacturing is still of paramount importance to the Chinese economy but why, where, when and how China makes things is changing. It continues to transform its manufacturing sectors from low-cost, low value-added dirty industries to high value-added, tech-driven production. In other words, instead of making shoes, China is now making the machines, lasers and innovative fabrics that others are buying to make shoes.

The 40 years of reform and opening up in China have been marked by major accomplishments and milestones, with $10,000 in per-capita GDP one of the biggest and most important of those since it is a sign of economic wellbeing for the average person and signals that China is moving toward the full realization of the Chinese dream.

The author is a U.S.-based consultant and op-ed contributor to Beijing Review

Copyedited by Rebeca Toledo

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