Productivity doesn’t grab public attention when assessing an economy, overshadowed by the gross domestic product numbers that, for a country such as China, have long been the most important criteria for measuring both growth and the performance of the officials in charge.
The ability of Chinese leaders and corporate chieftains to wring more productivity out of their economy is fundamental to China’s bid for global economic supremacy and to its desire to improve domestic living standards.
If it cannot, that vision dims considerably.
But what University of Toronto economics professor Loren Brandt has found is that “China’s problem is a productivity problem.”
Understanding that productivity stalled has ”huge implications in terms of how you interpret what’s going on today in terms of why this economy is growing at the rate it is, and what is the true underlying reason for it,” Prof. Brandt said in Beijing during a recent visit, as he continues his research on the matter.
His research suggests not that there is a problem with the innovation of Chinese companies or the ambition of its entrepreneurs – but that something structural has gone amiss, a problem rooted largely in the persistence of the state in the halls of private industry. Unproductive state-owned companies are a Communist Party legacy and have maintained unexpected strength under President Xi Jinping, who has sought to reinvigorate the party’s role in all aspects of national life.
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