Taps Coogan – September 17th, 2020

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To the extent that Chinese economic statistics can be believed, the Chinese economy is weaning itself off of an over-reliance on manufacturing and exports, transitioning to a more internally driven service sector model, as the following chart from Statista reveals.

The associated narrative goes that as wages in China have risen and as its technological prowess has improved, it has started moving up the economic value chain in a process similar to what happened in developed economies like the US since the 1970s. While there is certainly an element of truth to that, no less than Chinese Premier Li Keqiang, the ‘Number 2’ man behind Xi Jinping, recently pointed out that 600 million people in China still live on $5 a day. The chart above is likely as much about stagnation in agriculture and manufacturing as it is about evolution in the service sector. If de-industrialization was a painful process in the West, so too will it be painful in China.

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