In recent decades, China’s industrial sector has been at the forefront of the nation’s economic transformation, boasting rapid development supported by aggressive governmental policies. Amid these sweeping reforms, attention has been keenly focused on whether these efforts have successfully enhanced economic efficiency, spurred technological progress, and reduced the stark regional disparities that characterize China’s vast industrial landscape. A comprehensive study spanning the years 2000 to 2022 has shed new light on these topics, revealing a complex interplay of efficiency gains, technology gaps, and productivity shifts across mainland China’s 31 provinces and four major regions.
The analysis utilized advanced quantitative methodologies including Data Envelopment Analysis – Slack-Based Measure (DEA-SBM), Meta frontier analysis, and the Malmquist–Luenberger Index (MLI) to dissect the performance of China’s industrial sector. These methods enable researchers to evaluate not only economic efficiency but also the relative technological frontiers at both regional and national scales, as well as the drivers behind productivity changes over time. The findings offer a nuanced view of China’s industrial output, one marked by significant progress yet persistent imbalances.
Initial results highlighted a general upward trajectory in economic efficiency during the early 2000s, with notable improvements from 2000 through 2012. However, this growth phase was interrupted by fluctuations reflective of complex domestic and global economic dynamics. Post-2012, the pattern of efficiency became more erratic, with periods of decline interspersed with recoveries, ultimately stabilizing at an average efficiency score of approximately 0.7482. Such a figure indicates that, on average, China’s industrial enterprises operated at about 75% efficiency relative to an optimal production frontier, implying a substantial opportunity for improving how resources are utilized.
A deeper dive into regional performance uncovered stark contrasts. Coastal provinces such as Guangdong and Shanghai emerged as leaders, not only edging closer to optimal efficiency but also capitalizing on advanced industrial infrastructure and strategic access to international markets. Conversely, inland provinces like Tibet exhibited significantly lower scores, underscoring systemic challenges related to logistics, investment, and technological absorption. This disparity illustrates a persistent technological divide, reflecting varying levels of innovation capacity, capital availability, and human capital quality across China’s immense geographical expanse.
The meta-frontier efficiency, which establishes a reference technology frontier encompassing all regions, averaged close to the same level as overall economic efficiency, framing a benchmark for assessing total technical progress. On a group basis, however, average frontier efficiencies were higher, about 0.8507, revealing that some regions operate nearer their own best-practice frontiers, while still falling short of the meta-frontier representing the highest attainable technology level nationwide. The technology gap ratio (TGR)—a measure indicating the distance between group frontiers and the overall meta-frontier—averaged around 0.8807, highlighting technological lag in certain regions relative to national leaders.
Among the regional clusters, the eastern provinces—embodied by Shanghai, Beijing, and Guangdong—consistently exhibited elevated meta-frontier and group-frontier efficiency scores, along with TGR values nearing unity. This proximity to the technology frontier reflects not only infrastructure sophistication but also substantial investment in R&D, an abundance of skilled professionals, and well-developed industrial ecosystems. Such advantages catalyze technological convergence within these areas, minimizing efficiency losses due to lagging technology adoption.
By contrast, the western and northeastern regions of China, including provinces such as Tibet and Gansu, lagged behind, demonstrating the lowest TGR and efficiency scores. These areas confront numerous structural complications, including underdeveloped transportation networks, limited influx of foreign and domestic capital, lower levels of skilled labor, and inadequate investments in innovation. The divergence in technological capacities across regions magnifies economic inequality and constrains the potential for balanced national development.
The study also emphasized total factor productivity (TFP) dynamics, captured through the Malmquist-Luenberger Index, which revealed an encouraging average productivity growth rate of 4.23% over the examined period. This growth arose from two key components: efficiency change and technological change. Crucially, the data revealed that technological progress—refinements in industrial methods, innovation diffusion, and adoption of frontier technologies—was the primary driver of productivity enhancement rather than pure efficiency improvements in resource use.
Disaggregating by regions, the central and western provinces exhibited robust productivity increases stemming from simultaneous advances in efficiency and technology development. The eastern provinces, in contrast, experienced a slight decline in efficiency despite increasing productivity, suggesting diminishing returns on resource utilization or challenges in optimizing inputs amidst rapid expansion. The northeastern region also showed productivity gains largely fueled by technological improvements, yet efficiency waned, pointing to the need for concerted efforts to strengthen operational efficiency alongside innovation.
Provincial leaders in productivity growth included Inner Mongolia, Xinjiang, Chongqing, Qinghai, Jiangsu, Guizhou, and Shanxi, reflecting heterogeneous pathways to success that blend local advantage, policy support, and adaptation to technological advancements. These regions leveraged targeted strategies that capitalized on resource endowments, industrial upgrading, and integration into domestic and international value chains.
Crucially, all findings passed rigorous statistical validation affirmed by significance levels below 0.05, confirming that the observed differences in economic efficiency, technological gaps, and total productivity across Chinese regions are substantive and unlikely to be due to chance. This validation affirms the critical need for nuanced, region-specific interventions to address the heterogeneous landscape of industrial development.
The implications for policymakers are profound and multilayered. Addressing the entrenched technological disparities requires fostering mechanisms that facilitate technology transfer from advanced coastal provinces to lagging inland and western regions. Such initiatives might include building technology-sharing platforms, promoting cooperative linkages between universities and industry, and incentivizing enterprises to invest in underdeveloped provinces via grants, tax benefits, or tailored subsidies.
Furthermore, infrastructural deficits remain a major bottleneck in less-developed regions, hindering efficient industrial processes and access to markets. Strategic investment in transport, digital connectivity, and industrial park development could unlock new opportunities for firms and stimulate holistic economic growth. Simplification of regulatory frameworks and targeted support for small and medium-sized enterprises (SMEs) could lower barriers to innovation, entrepreneurship, and broader participation in industrial modernization.
A vital pillar of sustainable progress lies in human capital development. Comprehensive workforce training programs aimed at emerging technologies—coupled with partnerships between educational institutions and enterprises—could enhance skill levels and retain talent in peripheral areas. Additionally, improving quality of life through housing, education, and social services plays a pivotal role in attracting and keeping skilled workers in regions traditionally plagued by brain drain.
Environmental sustainability demands urgent attention as well, with a growing need to integrate green technologies into industrial practices. Government support for renewable energy projects, stricter environmental standards, and incentives for waste reduction and resource efficiency can drive a cleaner, more sustainable industrial landscape. These measures can synchronize economic development with China’s broader climate ambitions.
Facilitating cross-regional collaboration through joint ventures, research consortia, and technology exchange programs can spur knowledge flow and disseminate best practices, accelerating convergence toward national technological frontiers. Public-private partnerships represent a potent mechanism to pool resources, leverage sectoral expertise, and drive innovation ecosystems that transcend provincial boundaries.
Lastly, rigorous systems for ongoing monitoring and evaluation of implemented policies are critical to ensuring adaptive and effective governance. Real-time feedback can enable policymakers to recalibrate programs, ensuring they remain aligned with evolving economic realities and technological trends. This responsiveness will be instrumental in sustaining momentum towards enhanced economic efficiency and regional equity.
In sum, this sweeping assessment underscores both the remarkable strides China’s industrial sector has made over two decades and the enduring challenges posed by regional disparities in technology and efficiency. By embracing a holistic policy mix that encompasses technology dissemination, infrastructural investment, human capital development, and environmental stewardship, China’s government can continue to drive robust, balanced, and sustainable industrial growth well into the future. The insights offered by this study provide an invaluable roadmap for realizing that vision in the complex and dynamic fabric of China’s industrial economy.
Subject of Research: Economic efficiency, regional technological heterogeneity, and total factor productivity change in China’s industrial sector
Article Title: Economic efficiency evaluation, regional technological heterogeneity, and total factor productivity change in the industrial sector of China
Article References:
Ping, Y., Yingqin, W., gang, W. et al. Economic efficiency evaluation, regional technological heterogeneity, and total factor productivity change in the industrial sector of China.
Humanit Soc Sci Commun 12, 1378 (2025). https://doi.org/10.1057/s41599-025-05745-4
Image Credits: AI Generated
