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Macroscope
Upper arm of China’s K-shaped economy both a blessing and a curse
China’s two-speed economy stems from the shift to new growth engines but the export boom it has created is doing little for jobs or consumption
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Nicholas Spiro is a partner at Lauressa Advisory, a specialist London-based real estate and macroeconomic advisory firm.
Ever since the Covid-19 pandemic erupted, concerns about “K-shaped” economies have proliferated. When it comes to describing business cycles, economists and investors have often used letters of the alphabet, yet it is the emergence of a bifurcated K-shaped economy that best describes the acute challenges confronting governments around the world.
Initially a US-centric description of the post-pandemic recovery, the K highlights a sharp divergence in which different parts of the economy experience drastically different outcomes. While high-income earners and the capital-intensive technology sector, especially the parts tied to the artificial intelligence (AI) boom, have done well, lower-income workers and many labour-intensive sectors have suffered.
While the K-shaped narrative is still heavily influenced by trends in the United States, uneven economic performance and sharp divergences between sectors are far more apparent in China. A glance at the latest batch of research reports from Wall Street banks shows that “two-speed” and “K-shaped” are the most frequently used terms to describe the performance of the economy.
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