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August 3, 2020

Chart of the Week: China’s progress up the value chain remains limited

by Fathom Consulting.

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Recently updated to include 2019 data, Fathom’s measure of China’s high-tech export share provides a more timely gauge of China’s progress in overhauling its enormous manufacturing base than either the World Bank or National Bureau of Statistics measures, which currently only extend to 2018. Fathom’s measure also uses a slightly different definition of high-tech — one that only includes those sectors specifically targeted by President Xi’s Made in China 2025 plan. As the chart highlights, despite the hype surrounding President Xi’s plan, progress up the value chain — by which we mean upgrading the Chinese economy from traditional industries reliant on low-skilled workers towards more advanced and technology-driven growth — has been slow in recent years, after stalling initially. While we believe that both the World Bank and official measures flatter the true picture, all three measures agree that progress has been limited. Looking ahead, we see little reason to believe that the renewed post-COVID-19 policy emphasis on high-tech, such as 5G, will make a material difference. In fact, as we explored in a recent In Brief, little appears to have materially changed in terms of China’s growth tactic since the outbreak, with authorities continuing to mothball properties in the construction phase in a bid to keep workers employed, all the while adding to excess capacity.

Over the years, Fathom Consulting has created a wealth of proprietary indicators. This note uses information from Fathom Consulting’s tailor-made database, RiCArdo. The database contains detailed export data for over 200 countries and regions, with data for China having been made available on Refinitiv’s Chartbook last year, under ‘Fathom’s Proprietary Indicators’. The data have been painstakingly categorised into the high-tech sectors targeted by President Xi’s Made in China 2025 plan, as well as more general categories of goods and services.

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