"While patterns of structural transformation across China´s provinces are broadly in line with international experience,one important difference is in labor productivity differentials between
services and the rest of the economy. Specifically the gap between labor productivity in the rest
of the economy and services has widened across China´s provinces as they have moved from low
to middle income,which is contrary to the trend observed in cross-country experience. Evidence from a panel of China´s provinces suggest that credit and labor market frictions have inhibited labor productivity growth in services relatively more than in the rest of the economy. Reducing these frictions
is essential for achieving the next level of China´s development,one in which the service sector will need to play a more prominent role as an engine of growth.The evidence also suggests that improving labor productivity in services will lift the consumption share of GDP,thereby advancing the needed rebalancing of domestic demand in China".
Source: IMF Working Paper
services and the rest of the economy. Specifically the gap between labor productivity in the rest
of the economy and services has widened across China´s provinces as they have moved from low
to middle income,which is contrary to the trend observed in cross-country experience. Evidence from a panel of China´s provinces suggest that credit and labor market frictions have inhibited labor productivity growth in services relatively more than in the rest of the economy. Reducing these frictions
is essential for achieving the next level of China´s development,one in which the service sector will need to play a more prominent role as an engine of growth.The evidence also suggests that improving labor productivity in services will lift the consumption share of GDP,thereby advancing the needed rebalancing of domestic demand in China".
Source: IMF Working Paper
