China | A shift-share analysis of productivity growth

Summary

This report analyzes labor productivity in China from 2013 to 2023. Despite a slight slowdown, growth remained robust. The key was the boom in high-productivity services, which offset the slowdown in the manufacturing sector, demonstrating a successful rebalancing towards a service-driven economy.

Key points

• Key points:
• Aggregate labor productivity growth slowed marginally, from a 44.5% gain in the 2013-2018 period to 43.8% in 2018-2023, demonstrating the resilience of the Chinese economy.
• Growth was primarily driven by "within-sector" improvements, thanks to increased R&D investment, which rose from 2.08% of GDP in 2013 to 2.65% in 2023, surpassing the EU average (2.2%).
• The manufacturing sector's contribution to productivity gains was halved, from 17.4% in 2013-2018 to 8.5% in 2018-2023, while the contribution from software and IT services nearly doubled from 1.1% to 2.0%.
• Within manufacturing, only 8 out of 31 subsectors managed to simultaneously increase productivity and employment share in 2018-2023, whereas 21 subsectors experienced a productivity slowdown.

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