Raising productivity is a big potential source of economic growth in China. But it\u2019s also a potential source of layoffs and uncomfortable societal changes.<\/p>\n
The McKinsey China report, released last month, is the latest in a series of productivity studies that MGI, the consulting firm\u2019s research arm, has been producing since the early 1990s. The first ones showed that German and Japanese employment-and-growth\/service-sector-productivity-and-international-competitiveness were on the whole far less productive than their U.S. counterparts.<\/p>\n
A worker in the highly protected and fragmented food-processing industry — which employs more workers than the auto, computer, consumer-electronics and machine-tool industries combined — produces $39 worth of food in an hour, compared with an American counterpart’s $119. Productivity gains have been the main driver of rising living standards in country after country. That was the case in Japan, too, but spectacular productivity growth in a few key industries in the 1970s and 1980s failed to spread to the rest of the economy and eventually slowed to a near halt even in those industries.<\/p>\n
There are some Chinese companies with productivity near rich-country levels, and many that lag dramatically. But the stars and the laggards aren\u2019t concentrated in particular industries as in Japan. \u201cIn every sector there are leaders that achieve global competitiveness and yet there is also a long tail,\u201d emailed Shanghai-based McKinsey senior partner and MGI director Jonathan Woetzel, who worked on both the China productivity report and the 2015 Japan one.<\/p>\n
Woetzel thinks this is a sign that China may find it easier to raise productivity than Japan did. All it will take is more companies emulating the industry leaders through digitization, globalization, lean production, automation — and maybe even some things that don\u2019t end in -ion.<\/p>\n
What could keep that from happening? Well, China\u2019s banks have kept a lot of the productivity laggards in business by continuing to lend to them. And it\u2019s China\u2019s government that controls the biggest banks, as well as a lot of the low-productivity companies they lend to.<\/p>\n
Chinese President Xi Jinping actually talked about reforming these state-owned enterprises.<\/p>\n
In some ways China\u2019s leaders seem more willing than Japan\u2019s to accept the upheaval that often comes with productivity gains. They are unwilling, however, to cede control of the economy. And that may be what keeps them from realizing their $5 trillion opportunity.<\/p>\n","protected":false},"excerpt":{"rendered":"
Raising productivity is a big potential source of economic growth in China. But it\u2019s also a potential source of layoffs and uncomfortable societal changes. The McKinsey China report, released last month, is the latest in a series of productivity studies … Continue reading