China’s Labor Productivity Growth Continues to Outpace US Growth

Labor productivity growth is arguably the foundation of economic progress. Yet U.S. labor productivity growth has stagnated in recent years, with only modest gains compared to past decades. Data from CEIC and the U.S. Bureau of Labor Statistics show that China’s labor productivity growth continues to exceed that of the United States. To reverse this trajectory, U.S. policymakers should develop a national productivity strategy that draws on sector-specific analyses to strengthen productivity across all industries.

Despite Chinese scholar Cai Fang’s assertion that China’s productivity gains will soon be exhausted, the reality is that China’s productivity has grown steadily over the past decade. More concerning, this growth has consistently outpaced that of the United States. From 2013 through 2019, China’s year-over-year GDP growth hovered around 6 to 7 percent, compared with U.S. growth of just 1 to 2 percent. The only exception came during the Covid-19 pandemic, when the United States temporarily surpassed China—but that growth was largely because more low-productivity sector workers were out of work. In 2020, China’s productivity rose only 2.9 percent, while U.S. productivity rose 5.3 percent. Yet despite this downturn, China rebounded strongly, hitting over 9 percent growth in 2021, while U.S. growth fell back to 2 percent. In the subsequent years, China has continued to surpass the United States in year-over-year productivity growth.

Figure 1: Year-over-year labor productivity growth

U.S. policymakers should develop a national productivity strategy that leverages sector-specific analyses to strengthen productivity growth across the economy. By tailoring policies to the unique challenges and opportunities of each industry, policymakers can ensure that advanced sectors remain globally competitive while also boosting productivity in the broader economy. At the same time, the Trump administration should charge the Office of Information and Regulatory Affairs (OIRA) within the Office of Management and Budget (OMB) with a thorough review of all federal regulations that stand in the way of greater automation and technology adoption, including in housing, freight rail, and other sectors.

Without such a comprehensive approach, the productivity gap between China and the United States will continue to widen, giving China more global power and the United States less.