Pekingology Inside China's Dual Economy
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Aug 6, 2026 Alicia García-Herrero, economist and expert on Chinese and Asian economics, explains China’s “dual economy.” She explores how technological ambition outpaces household prosperity. She discusses state support for advanced industries, unprofitable scale-driven firms, and how AI and local politics shape wages, consumption, and employment.
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Intent Explains China's Dual Economy
- China pairs world-leading tech advances with stagnant household fortunes, creating a deliberate dual economy.
- Alicia García-Herrero argues the country prioritizes strategic technological goals over inclusive economic growth, making intent central to its model.
Households Subsidize China's Industrial Rise
- Chinese households have subsidized industrial upgrading via very high saving rates and low labor share of GDP (~30%).
- That sustained cheap funding let China fund industrial policy while keeping wages low relative to GDP.
Hegemony Trumps Immediate Household Gains
- The party prioritizes technological hegemony even if domestic inclusion weakens, because global dominance can reset rules and recoup domestic costs.
- García-Herrero sees this as intentional strategy, not accidental side-effect.