Any hope that postpandemic reopening would lead to a return to rapid economic growth has floundered
To understand the problem, go back to basics. Growth comes from only three places: more people, more capital or better use of workers and capital—higher productivity. China won’t have more workers, as its population began to shrink last year.
Throwing more capital at the economy got it into its current problems, as companies and governments borrowed far too much to build.
That leaves productivity.
U.S. visitors to the gleaming metropolis of Shanghai taking the high-speed train to Beijing and paying for everything on their phones will be wowed by the technology.
But productivity is everywhere except in the statistics, where it has been falling for more than a decade after an extraordinary period of growth that followed China’s entry into the World Trade Organization in 2001. Weak earnings and low share prices are the natural corollary of weak productivity, and the government is standing in the way of improvement.
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