India questions China’s developing country status on per capita basis

What is the news?

During the latest round of China’s trade policy review, India questioned China’s claim that it was a developing country.

Also, the US has been demanding that countries like China and India should voluntarily give up the benefits given to developing countries at the WTO, on account of their rapid economic progress. However, both India and China have opposed such a move.

How the World Bank categorises countries based on income?

The World Bank assigns the world’s economies to four income groups—low, lower-middle, upper-middle, and high-income countries.

The classifications are updated each year on July 1 and are based on GNI (Gross National Income) per capita (in current $) of the previous year.

CategorisationPer Capita Income (PCI)Examples (PCI)
High income$12,696 or moreUSA ($63,413)
Upper Middle income$12,695 to $4,096
China ($10,435)
Low Middle income$4095 to $1046
India ($1928)
Low income$1045 or less
 

Hence, China’s per capita income of $10,435 for 2020, makes it an upper middle income country, while India’s per capita income of $1928 makes it a low middle income country

What is the significance of this classification?

A member describing itself as a developing country can make use of the advantageous provisions available to such countries. All WTO agreements contain special provisions for developing countries, including longer periods to implement agreements and commitments, handle disputes and implement technical standards.

Note: Owing to the lack of proper definitions, WTO members themselves declare whether they are “developed” or “developing” countries. (Members can challenge each other’s declared status)
Have other countries questioned China’s developing status?

Yes.

Apart from India, Brazil, Indonesia and the European Union have also questioned China’s developing country status.

How has China responded?

China, in its reply to India, said that

The concept of developing countries is relative to developed countries, and international organisations do not have a unified definition of developing countries.

India also asked China to explain its shift from a stage of high-speed growth to a stage of high-quality development, as it has claimed. China replied that under ‘high-quality development’ innovation becomes the first driving force. Entering the stage of high-quality development, the main characteristics of China’s economic development are: shifts from high-speed to medium-high speed in economic growth, from pursuit of scale and speed to quality and efficiency in economic development, from a focus on capacity increase to a balance between adjusting existing resources and optimising additional resources.

Replying to the EU, it said that,

Though its economic and social development has made great progress after decades of reforms, the problem of unbalanced and inadequate development remains.

Source: This post is based on the article “India questions China’s developing country status on per capita basis” published in Business Standard on 5th Jan 2022.

Print Friendly and PDF