Adair Turner argues that China's technological prowess will inevitably drive down industrial employment worldwide

China’s huge trade surplus, now running at over US$1 trillion per year, poses important macroeconomic and trade-policy issues, which were recently addressed in a valuable Project Syndicate compendium. But aside from short-term policy choices, it is also vital to understand the deeper implications of China’s manufacturing prowess for global trends in employment and relative prices.

China’s “Made in China” strategy, launched in 2015 to achieve leadership positions in advanced industrial sectors, has been stunningly successful. The United Nations Industrial Development Organization estimates that, on current trends, China’s share of global manufacturing value added, which was 6% in 2000 and 30% in 2020, could reach 45% by 2030. China produces nearly 75% of all electric vehicles sold worldwide and 86% of solar panels, and while it still lags behind the West in semiconductors and commercial airplanes, it is closing the technology gap.

This success is often attributed to direct subsidies, which grew 60% between 2016 and 2022. But as Thomas Gatley of Gavekal Research shows, direct subsidies have declined by 25% since 2022, while new forms of indirect support—tax breaks for investment in favored technologies, support for rapid land acquisition, and preferential access to low-cost capital—have grown. In addition, deep structural biases in the Chinese economy produce a very high savings rate, which keeps overall interest rates low.

Together, this amounts to a collective choice (albeit not a democratic one) to set a lower social discount rate than other countries in the trade-off between current and future consumption.

Such bias toward investment does not always deliver sustained productivity growth. Forced savings and high investment enabled the Soviet Union to achieve an initial growth spurt, before bad capital allocation, inefficiency, and corruption eventually led to stagnation. Huge investments can produce huge waste, as China itself showed in the excessive real estate construction of the 2010s.

But in other sectors, China combines high investment with strong incentives for efficiency and innovation. Intense domestic competition and exposure to global markets, excellent transport and energy infrastructure, and superb science and engineering skills have enabled China to become a technological innovator and to grasp the effects of learning by doing and economies of scale, which drive dramatic cost reductions. These fundamental advantages are now more important to China’s competitiveness than direct subsidies and would continue to drive success in global markets even if direct subsidies were eliminated.

Ultimately, technological progress and increased productivity depend on two things—an increase in accumulated knowledge, often embedded in capital machinery, and the increasing use of non-human energy. But knowledge once acquired is not lost, and cheaper energy supply enables still cheaper energy production; the falling cost of solar or wind power reduces the cost of making solar panels or wind turbines.

Those factors would drive significant global productivity improvement even without China; but China’s policy choices and capabilities have dramatically accelerated the pace of potential advance.

Other countries must decide how to deal with the threat this acceleration poses to manufacturing jobs. If tariffs are ineffective, one response might be to welcome Chinese investment, which is growing rapidly worldwide and increased by 50% in Europe in 2025.

But these factories will be designed to match Chinese productivity, using Chinese capital equipment commissioned by Chinese engineers; and domestic competitors must match that productivity to survive, even if there are no Chinese imports.

The inevitable result will be very few manufacturing jobs anywhere. China’s 30% share of global manufacturing value added is produced by about 123 million workers; so, if world productivity matched Chinese productivity, all the manufactured goods the world consumes could be produced by around 400 million workers, which is about 7% of the global working-age population. And further rapid productivity improvements are inevitable. As a result, all manufactured goods will eventually be produced by just a few percent of the global workforce, repeating the pattern of developed-economy agricultural employment, which fell from typical workforce shares of around 40% in 1900 to 1–2.5% today.

This dramatic productivity improvement will inevitably cause many prices to collapse relative to products or services with brand or locational value. A US$4,000 Hermès handbag could today be traded for 80 solar photovoltaic panels, and that ratio is almost certain to increase in the future. So, too, will the price of attractive real estate in Beijing, Shanghai, Paris, or London, relative to electric vehicles.

As the economist Dani Rodrik suggests, this means that global consumers may gain as much as Chinese consumers from China’s remarkable technological prowess. It also raises complex questions about the sources of wealth in highly automated economies. But the long-term employment implications are clear.

In developed economies, manufacturing employment will decline, regardless of the industrial strategies pursued. And any expectation that manufacturing will absorb more than a trivial fraction of the big increases in the working-age population still occurring in India or Africa is a delusion. China is showing how few workers are needed to produce high-quality manufactured goods. Whatever the policy response to the latest China shock, that number will continue to fall.

Adair Turner is Chair of the Energy Transitions Commission. Copyright: Project Syndicate, 2026, published here with permission.