CHINA: "In the economic sense, it’s not a productivity-driven economy."

"Q: What is a big misconception about China’s economy?
"A: [O]ne of them is that they look at the Chinese R&D spending, and they look at, for example, some of the impressive technological progress the country has made, and then they drew the conclusion that the Chinese economy is driven by productivity and innovations. In fact, studies show that the total productivity contributions to the GDP have been declining in the last decade and even more. As China has begun to invest more in R&D, the economic contributions coming from technology, coming from productivity have been actually declining. In the economic sense, it’s not a productivity-driven economy. It is an overwhelmingly investment-driven economy.
    "I think that’s one of the biggest misunderstandings of Chinese economy. It entails implications about the future prospects of the country, whether or not you can sustain this level of economic growth purely on the basis of massive investments."

~ Yasheng Huang, Professor of Global Economics and Management at MIT’s Sloan Business School, in conversation with Tyler Cowen, taken from Timothy Taylor's post 'Interview with Yasheng Huang on the Development of the Chinese State'