Chinese economist Lu Ming has identified structural imbalances between manufacturing and services as the core obstacle facing China’s economy, according to an interview published by the Communist Party-affiliated newspaper China People’s Political Consultative Conference Daily on September 21.
Lu, a professor at Shanghai Jiao Tong University’s Antai College of Economics and Management, said that despite sustained fiscal and monetary easing, growth has continued to slow—evidence that the problem lies not in aggregate demand but in economic structure.
He argued that China’s traditional growth model, based on expanding capacity and cutting prices, has reached its limits. Domestic manufacturing now faces saturated demand, while trade surpluses draw international pressure. Excessive, inefficient competition has triggered a price spiral that is difficult to break.
Meanwhile, the service sector—covering elder care, education, healthcare, childcare, culture and sports—suffers from mismatches in quantity, quality, diversity and distribution relative to demand.
Lu attributed the sector’s underdevelopment to several factors: a lower value-added tax rate for services (8 percent) versus manufacturing (13 percent), which makes local governments favor manufacturing projects; a collateral-based lending system unfriendly to asset-light service businesses; entrenched social bias viewing service work as low-skill; and lingering regulatory barriers to private investment in services.
China’s GDP grew 4.7 percent year-on-year in the first half of 2026, slowing to 4.3 percent in the second quarter, with the government targeting 4.5–5 percent growth for the year. Lu noted that current growth is concentrated in capital-intensive sectors like AI, EVs and batteries, which generate limited employment and income gains—while AI simultaneously displaces jobs in programming, statistics and accounting. He called for greater investment in cultivating skills AI cannot replace, such as aesthetic judgment, empathy and communication.
Source: Central News Agency (Taiwan), September 23, 2026
https://www.cna.com.tw/news/acn/202609230353.aspx