A surge in Chinese government investment has helped push China’s economy out of the New Crown (a Communist Party virus) epidemic, but the deep weakness of low productivity is likely worsening, the Wall Street Journal reported Monday on its website.
The report said China’s economy has recovered strongly since early last year, when Beijing sealed off much of the country to combat the New Guinea epidemic. But the rebound has been uneven, relying heavily on government spending and state-sector investment, while private spending has remained weak.
The report also cites a new report from the International Monetary Fund (IMF) that says the above factors have exacerbated China’s downward trend in productivity growth, which is defined as output per unit of input. The report shows that the productivity of the Chinese economy, as measured by an indicator of the average productivity of each sector that measures the efficiency of the overall economy, is only 30 percent of that of the world’s best performing economies such as the United States, Japan or Germany.
The IMF estimates that the productivity of China’s state-owned enterprises is about 80 percent of that of private enterprises. These SOEs typically have access to low-interest loans, while private firms typically have more difficulty obtaining bank loans. imF data show that Chinese SOEs are still less profitable than private firms, and a higher percentage of SOEs are losing money.
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