China Falls Into High-Tech Trap as Productivity Growth Nears 0% in 2023-24

1 articles · Updated · richardkatz.substack.com · Jun 22

China’s growth slowdown is being framed as a “high-technology/low-productivity trap,” where advances in strategic industries have not translated into stronger economy-wide output or productivity.
2023-24 Total factor productivity growth was described as almost negligible, after labor-productivity growth slowed to 7.2% in 2010-19 from 9.3% through 2009 as investment kept rising but efficiency gains faded.
China’s headline-winning sectors remain too small to lift the whole economy: solar employs 1.5% of workers, autos and parts 0.7%, and batteries 0.2%, while farming, retail and construction account for 45% of jobs but lag badly in productivity.
Zombie firms and weaker business dynamism are compounding the problem, with manufacturing zombie share rising to 11% in 2024 from 4% in 2020, services at 17%, and new firms’ manufacturing job share falling sharply after 2007.
The report argues Xi Jinping’s policy reversals, not a classic middle-income trap, are driving the structural malaise even as China retains enough economic weight to sustain geopolitical competition unless social strains intensify.