Synopsis:

China’s sharp growth slowdown since 2010, which came after three decades of double-digit growth and allowed it to significantly converge to the high-income club, has triggered the worries that it may fail into the “middle-income trap” (MIT). In its crucially needed transition to a higher plateau of quality growth to avoid MIT, amongst others, the role of China’s systemic institutions and their symbiosis with the Belt and Road Initiative (BRI) has come to the forefront of the current discussions. This article aims to link the mechanics of MIT and BRI, which is evolving at the interface of the liberal world economy and the sphere of China’s state capitalism, and concludes that the BRI might function as a two-edged sword: To the extent that China fully “multilateralize” the BRI, it might further support the rise of China. Alternatively, in case it fails to solve participation constraint and collective action problems due to several institutional loopholes involved in its governance model and therefore brings asymmetric gains to Chine, it would isolate China and work against its efforts to avoid MIT.