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Michael Schuman

China Has World's Biggest Productivity Problem

And solving it will require opening up.
Zombie coal companies are wasting financial resources.

Zombie coal companies are wasting financial resources.

Photographer: Qilai Shen/Bloomberg

Just about everybody assumes that China will overtake the U.S. as the world’s indispensable economy. One factor, however, could slow its seemingly relentless march and cast doubt on China’s prospects for becoming an advanced economy: faltering productivity.

Sure, China is advancing daily in wealth, technology and expertise. But nothing is inevitable in economics. As costs rise and the labor force shrinks due to Beijing’s decades-long “one-child” policy, China will need to squeeze a lot more out of each remaining worker to keep incomes growing. If not, China could succumb to a sluggish trajectory that threatens both its future and that of the entire global economy.