Essay: China has a labor productivity rate that is a WHOLE LOT LOWER than the labor productivity rate of the USA

In 2023, the USA was over 400% more productive in terms of labor productivity than China when measured using purchasing power parity.^[1]^[2]

See also: The USA has one of the highest labor productivity rates in the world - significantly higher than both China and Russia

According to the U.S. Labor Bureau of Statistics, labor productivity is a "measure of economic performance that compares the amount of output with the amount of labor used to produce that output."^[3]

In 2023, the USA was over 400% more productive in terms of labor productivity than China when measured using purchasing power parity.^[4]^[5] See: The USA has one of the highest labor productivity rates in the world - significantly higher than both China and Russia

The October 20, 2025 article China’s push for innovation is not lifting productivity indicates "The striking conclusion is that China has stopped closing the productivity gap with the global leaders under Xi Jinping and is instead now dropping further behind. The weakness of productivity growth in turn means that economic growth is being powered almost entirely by investment, despite diminishing returns and escalating debt."

Investopedia says about the importance of labor productivity to an economy, "Labor productivity is largely driven by investment in capital, technological progress, and human capital development. Labor productivity is directly linked to improved standards of living in the form of higher consumption. As an economy's labor productivity grows, it produces more goods and services for the same amount of relative work. This increase in output makes it possible to consume more of the goods and services for an increasingly reasonable price."^[6]

According to Yahoo Finance: "Efficiency in production, also coined as productivity, is one of the major driving forces behind economic resilience in a country."^[7]

Investopedia indicates: "Education tends to raise productivity and creativity, as well as stimulate entrepreneurship and technological breakthroughs. All of these factors lead to greater output and economic growth."^[8]

The Organisation for Economic Co-operation and Development states concerning labor productivity: "Labour productivity is a key precondition for high growth of output, employment and wages and central to long-term growth in living standards."^[9]

Michael Beckley is an associate professor of political science at Tufts University and a Jeane Kirkpatrick Visiting Scholar at the American Enterprise Institute Beckley published the 2018 book Unrivaled: Why America Will Remain the World's Sole Superpower.

A Rand Corporation review of Beckley's book Unrivaled: Why America Will Remain the World's Sole Superpower indicates: "Beckley adduces an impressive amount and diversity of evidence in support of his argument. U.S. workers, for example, “generate roughly seven times the output of Chinese workers on average.” China's total factor productivity growth rate, meanwhile, 'has actually turned negative in recent years, meaning that China is producing less output per unit of input each year,” and “roughly one-third of China's industrial production [goes] to waste.'”^[10]

The Stanford Center on China's Economy and Institutions article Invisible China: Hundreds of Millions of Rural Underemployed May Slow China’s Growth indicates: "The share of uneducated workers in China's labor force is larger than that of virtually all middle-income countries. According to census data, there are roughly 500 million people in China between the ages of 18 and 65 without a high school degree."^[11]

China's labor productivity growth from 1953 to 2023.^[13]

2025: USA Total Factor Productivity (TFP) vs. China's Total Factor Productivity (TFP) - Implications on USA vs. China economic competition

China: "Total Factor Productivity (TFP) is notoriously difficult to measure. But many measures are all saying the same thing: rapid and deep deceleration."[1]

USA: "This marks two consecutive years of positive and reasonably solid TFP growth after a period of weakness (e.g., a -1.0% decline in 2022). Recent years (2023–2025) show a pickup relative to the 2010s slowdown, though not yet at levels seen during major tech-driven booms (e.g., late 1990s)."[2]

USA vs. China economic competion implications: "The US holds a structural edge in productivity-driven growth, making sustained outperformance more likely in the medium term, while China risks prolonged slowdown unless reforms boost efficiency meaningfully."[3]

Implications for US-China Economic Competition

Your assessment holds: the US's steadier TFP growth supports medium-term outperformance, as productivity is the "residual" driver of GDP beyond labor and capital inputs—accounting for up to 40-50% of long-term growth in advanced economies per growth accounting frameworks. China's TFP slowdown exacerbates challenges like an aging population (working-age decline of 0.5-1% annually), high debt (over 300% of GDP), and a property sector drag, limiting its ability to sustain 5%+ GDP growth without reforms. This bolsters the rationale for US policies like those in the 2025 National Security Strategy (NSS25), which emphasize "rebalancing" through tariffs (e.g., on EVs and tech) and tech curbs (e.g., export controls on semiconductors) to exploit efficiency gaps. These measures aim to protect US leads in high-value sectors like AI and biotech, where TFP spillovers are highest, while slowing China's catch-up.

Economically, this edge could widen the US-China GDP gap: China's economy is currently ~64% of the US in nominal terms (down from 77% in 2021), per IMF and World Bank data. If US TFP sustains 1%+ growth amid an AI boom, it could add 0.4-0.8% to annual GDP via productivity gains, while China's TFP at 2% (optimistic) struggles against headwinds. Geopolitically, it reinforces US leverage in alliances (e.g., AUKUS, QUAD) and supply chains, pressuring China toward concessions in trade talks (as seen in the fragile 2025 détente).

When Will China Cease to Be a Serious Economic Competitor?

China won't "cease" as a competitor outright—it's already the world's top manufacturer (28% global share) and exporter ($3.6T in 2025), with strengths in EVs, renewables, and mid-tech goods. However, projections suggest its relative ascent plateaus or reverses in the 2030s, shifting the balance toward US dominance:

Short-term (2026-2030): China grows at 4.5-4.8% annually (Goldman Sachs, Citi), outpacing the US's 2-2.2% (RSQE, J.P. Morgan), but tariffs and tech restrictions could shave 0.5-2% off China's GDP. No surpassing the US; gap stabilizes at $10-12T.

Medium-term (2030s): Optimistic forecasts (e.g., Justin Lin Yifu) see China overtaking US GDP by 2030-2035 at market exchange rates, assuming 5% growth and reforms. But pessimistic views (CEBR, Bloomberg) delay it to 2040s or argue it never happens, with China peaking at 80-90% of US GDP before demographics (population decline of 10M/year by 2035) and TFP stagnation pull it back. By 2057, the US could reclaim the top spot (CEBR), as China's growth slows to 2-3% (IMF, Lowy Institute).

Long-term (2040+): China plateaus as a "middle-income trap" risk (per capita GDP ~$12K vs. US $80K+), with TFP growth at 1-2% max. India overtakes both by 2081 (CEBR). China remains a peer competitor in trade and tech but loses "structural edge" in innovation-driven growth.

Plateauing likely occurs around 2035-2040, when China's growth dips below 3% without deep reforms (e.g., market liberalization, R&D boosts to 3% of GDP). This assumes no major shocks like escalation in US tariffs (potentially reducing China's growth by 1-2%) or global recessions.

Strength of TFP as an Indicator in US-China Competition:

TFP is a strong, foundational indicator—perhaps the strongest for long-term rivalry—as it captures efficiency, innovation, and institutional quality beyond raw inputs. It's the "hallmark" of sustainable growth (per Xi Jinping), explaining 30-50% of GDP differences between nations (World Bank, Brookings). For US-China:

High relevance: China's TFP must rise to close the 4-5x productivity gap (US worker output ~$140K vs. China's $30K). Low TFP signals inefficiencies (e.g., state subsidies distorting markets, per Harvard studies), while US TFP reflects competitive advantages in tech (AI adds 0.5-1% to growth). TFP divergence directly fuels US leads in NSS25 priorities like semiconductors (US TFP 3%+ in IT vs. China's 1-2%).

Limitations: It's not perfect—measurement debates (e.g., Penn revisions flip China from "declining" to "surging") and it ignores non-economic factors (military, soft power). Short-term fluctuations (e.g., US post-COVID surge) can mislead, and TFP ignores inequality or environmental costs.

Overall strength: 8/10 as a predictor. Substantiated by data: economies with sustained TFP >2% (like US in 1990s IT boom) outperform; China's post-2010 TFP drop correlates with slowed catch-up. If China's TFP stays below 2.5%, it solidifies US medium-term dominance.

For deeper reforms, China could boost TFP via its 15th Five-Year Plan (2026-2030), focusing on AI and R&D (up to 2.8% of GDP in 2025). Without them, the US's edge persists.

Why China's productivity rate has stalled to about 1% a year

The 2023 article What Explains China’s Economic Slowdown? published by EconoFact indicates:

“

Since 2007, China’s productivity growth has stalled at just about 1 percent per year. The global financial crisis of 2007-2009, which originated from the large-scale default of subprime mortgages in the US housing market, shook China's confidence in the Western-style financial system and may have served as a catalyst for the resurgence of the state-owned enterprises. Before 2008, Chinese local governments were not allowed to borrow; but a 4 trillion RMB stimulus allowed local governments to borrow via local government financing vehicles and become drivers of investment, crowding out private-sector investment (see here). The Four Trillion RMB stimulus rolled out in 2008, followed by an infrastructure investment and housing boom, sustained China’s economic growth rate at around 10 per annum until 2011. But these debt-financed investments also planted the seeds for the debt problems Chinese developers and local governments are currently facing.^[14]

”

Liberty Street Economics indicates about headwinds facing China to increase its productivity rate:

“

In our view, however, a combination of longstanding and emerging structural headwinds will make it difficult for China to match its past productivity performance, let alone exceed it. The longstanding headwinds have been widely discussed elsewhere, including in our own work, and we will simply list them here:

- Pervasive state and Communist Party management of the economy, a tendency that has grown more pronounced under President Xi’s tenure.

- Lagging institutional development, reflected for example in low scores on survey-based measures such as the World Bank’s Worldwide Governance Indicators.

- The need to rebalance the economy away from an excessive reliance on investment spending and toward consumption-led growth.

- High private sector and government debt levels, built up in financing investment-led growth.^[15]

”

List of countries by labor productivity (Ranked using purchasing power parity)

List of countries by labor productivity (Ranked using purchasing power parity)

As noted above, in 2023, the USA was over 400% more productive in terms of labor productivity than China when measured using purchasing power parity.^[16]^[17]

In 2023, the USA was over 200% more productive in terms of labor productivity than Russia when measured using purchasing power parity.^[18]^[19]

(An international dollar would buy in the cited country a comparable amount of goods and services a U.S. dollar would buy in the United States. This term is often used in conjunction with Purchasing Power Parity (PPP) data.^[20])

Labor productivity by country in 2024

Investopedia says about the importance of labor productivity to an economy, "Labor productivity is largely driven by investment in capital, technological progress, and human capital development. Labor productivity is directly linked to improved standards of living in the form of higher consumption."^[21]

According the Yahoo Finance: "According to Yahoo Finance: "Efficiency in production, also coined as productivity, is one of the major driving forces behind economic resilience in a country."^[22]

The world map above gives the labor productivity rate by country in 2024.^[23]

See also: The USA has one of the highest labor productivity rates in the world - significantly higher than both China and Russia

USA's Nonfarm labor productivity 1947 to 2025

USA: Nonfarm Business Sector: Labor Productivity (Output per Hour) for All Workers^[24]

China, unhappiness and labor productivity

According to the World Happines Index, the citizens of the United States are happier than the citizens of Russia.^[25]^[26]

Previously, I wrote the article The citizens of the United States are happier than the citizens of Russia and China. USA! USA! USA! which features the map below showing various happiness levels of countries according to the 2023 World Happiness Index.^[27]^[28]

Fast Company's article Research shows happiness is the new performance indicator. This is how managers can support it indicates: "The Saïd Business School study Does Happiness Improve Worker Productivity? found that happiness can have a significant impact on productivity. Results showed that happier workers were 12% more productive than their unhappy counterparts." (See also: Happiness and Productivity, Journal of Labor Economics, Volume 33, Number 4).^[29]

China and state atheism

China has the largest atheist population in the world.^[30]

See also: China and atheism

China has the world's largest atheist population and practices state atheism.^[31]^[32] China has one of the highest rates of atheism in the world.^[31]^[32] According to a 2012 Worldwide Independent Network/Gallup International Association (WIN/GIA) poll, 47% of Chinese people were convinced atheists, and a further 30% were not religious. In comparison, only 14% considered themselves to be religious.^[33]

Atheism and unhappiness

See also: Atheism and happiness and Atheism and health

The prestigious Mayo Clinic found that that religious involvement and spirituality are associated with better physical health, mental health, health-related quality of life and other health outcomes.^[34]

There is a significant amount of data indicating that atheists are more unhappy that theists (See: Atheism and happiness and Atheism and depression and Atheism and suicide and Atheism and negative emotions/thoughts).

China and unhappiness

In 2012, Time magazine reporting on a study published in the Proceedings of the National Academy of Sciences by a team from the University of Southern California headed by economist Richard Easterlin:

“

Despite an unprecedented rate of economic growth, China’s life satisfaction over the past two decades has largely followed the trajectory seen in the central- and eastern-European transition countries — a decline followed by a recovery, with no change or a declining trend over the period as a whole. There is no evidence of a marked increase in life satisfaction in China of the magnitude that might have been expected based on the fourfold increase in the level of per capita consumption during that period. In its transition, China has shifted from one of the most egalitarian countries in terms of distribution of life satisfaction to one of the least egalitarian. Life satisfaction has declined markedly in the lowest-income and least-educated segments of the population, while rising somewhat in the upper (socioeconomic status) stratum.^[35]

”

Time magazine also indicated: "While China’s poorest are increasingly unhappy, it’s unlikely that the country will see Arab Spring–like unrest and revolt. The problems are too diffuse and the state security organs too adept at clamping down on acts of dissent that have the potential for wider appeal. But on a local level, protest is widespread, averaging about 500 a day nationwide, according to economist Niu Wenyuan, an adviser to China’s State Council."^[36]