China’s push for innovation is not lifting productivity

China is mounting a push for global technological leadership by deploying industrial policy on a huge scale. Judging by how competitive many Chinese firms now are at the cutting edge, the effort is succeeding in many areas. But, according to Xi Jinping, the core measure of success is whether it is driving a broad increase in productivity. In that regard, the strategy is failing. Productivity growth has been weakening in manufacturing. There is mounting evidence that industrial policy is itself partly to blame.