Chinese Economics Thread
- Thread starter Norfolk
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I remember this old Glenn thread talking about the very same issue (specifically about total factor productivity, which uses labor as an additional input and not just capital investment). One driver of the loss in productivity is just due to the type of assets which are accumulated, housing and infrastructure, during the 2010s before the housing bubble burst. These assets have long lifespans but accrue a smaller amount of ROI compared to other types of assets per year (industrial machinery would have higher immediate ROI), so their returns are realized over a longer period of time, therefore the numerator (GDP) of the productivity/efficiency calculation will be lower if an economy accrues more of these types of assets.
Since I'm assuming this chart ends in 2024, due to the manufacturing pivot we've seen for the last 3 years and a reduction in the amount of financing/credit being issued in the Chinese economy (you can see this in the decline in growth of total social financing), we will probably see an improvement in productivity in the next few years.
Of course this calculation also doesn't account for how many of the actual products are being produced and consumed, the fact that industries with the highest capital efficiency (like software, financial services, consulting, legal services) also come with negative societal externalities, doesn't really tell us that much about how people's lives are improving in China, which is the most important purpose of an economy.
No wonder he is using the 2023 World Penn Table. 2025 World Table was updated and they changed from Maddison/Wu estimates to official GDP data. The new report showed a much higher TFP growth.
By what measure? Only Fans, Lawyers, or step mom prob?
So before 2011 China didn’t have much competition, was after more profits and wasn’t efficient?