Total Factor Productivity was proposed in 1942 by Jan Tinbergen, one of the first Nobel laureates in economics and a Dutch economist. It refers to the extra economic growth generated by factors that are "difficult to measure," such as improved allocation efficiency of factors, technological progress, or innovation, under the condition that all input factors of production remain unchanged. In other words, it produces a "1+1>2" effect. It can also be said that TFP is the efficiency of a country's operation and has increasingly become the main source of modern economic growth.

There is a significant gap between China's TFP and that of the world's major innovative countries such as the United States, and it is also lower than that of Japan and South Korea. The United States leads the world in TFP levels, while the overall TFP level of Asian countries is substantially lower than that of the US.

The latest Penn World Table 10.01 shows that in 2019, only Singapore, South Korea, and Japan in Asia had TFPs reaching over 60 percent of the US level. The TFPs of Malaysia, Thailand, and Indonesia were 59.6 percent, 49 percent, and 44.7 percent of the US level, respectively, while India and Mongolia had TFPs of 44.3 percent and 32 percent of the US level, respectively.

Before the reform and opening-up, China's TFP growth rate was lower than that of the United States in most years. After the reform and opening-up, productivity was greatly liberated, and TFP subsequently increased. From 1978 to 2011, China's TFP growth rate was higher than that of the US in most years.

Starting in 2012, it fell below the US rate again. There were some rebounds in 2013, 2014, and 2016, but the overall trend has been volatile and declining. The United States maintained a stable growth rate during the same period. According to the latest Penn World Table 10.01, China's TFP in 2019 was equivalent to 40 percent of that of the United States.

Looking back at the history of Japan and South Korea, in 1980, when Japan had basically completed industrialization, its TFP exceeded 80 percent of the US level. In 1991, when South Korea was at a similar stage of development, its TFP was 60 percent of the US level. These two figures represent the peak levels of Japan and South Korea's TFP catch-up with the United States.

If the current TFP growth rates of China and the US continue until 2035, the year set by the 20th CPC National Congress for China to basically achieve socialist modernization, China's TFP catch-up with the United States will be far lower than the levels achieved by Japan and South Korea in 1980 and 1991, which is clearly incompatible with high-quality development. There is room for improvement in both quantitative and qualitative aspects of advancing Chinese modernization through high-quality development.

Currently, China is experiencing a deepening aging population. In 2024, the population aged 60 and above exceeded 310 million, accounting for 22 percent of the national population. The marginal utility of infrastructure investment and capital factors in driving economic growth is diminishing. China's economic growth needs to find new drivers, shifting from relying mainly on capital input to improving resource allocation efficiency, relying on technological progress, and enhancing the quality of the labor force. It is necessary to unleash the vitality of factors more through institutional improvements and technological innovation, achieving high-quality development by increasing TFP and avoiding the "middle-income trap."

Asian countries are important partners

Asian countries, connected to China by mountains and rivers, are important partners for China in improving TFP, with at least three advantages. First, outstanding technological innovation. Asia has become an important destination for the transfer of global high-end production factors and innovation factors, with East Asia becoming a global R&D and innovation-intensive region.

The "International Science and Technology Innovation Index 2024" released by Tsinghua University and Springer Nature shows that Asia has become a main hub for global science and technology innovation centers. The top three cities in the Sci-Tech Innovation Power Index are all in Asia, and six of the top 10 cities are Asian. According to the latest "Top 100 Global Sci-Tech Innovation Centers (2024)" released by East China Normal University, one-third of the top 30 global sci-tech innovation centers are in Asia.

The latest "Global Innovation Index (GII) 2025" released by the World Intellectual Property Organization shows that among 139 global economies, East and Southeast Asia remain the core drivers of global innovation, performing well in business R&D, education, and innovation infrastructure, contributing to strong and sustained global R&D investment, high-tech exports, and innovative output. Six economies rank among the global top 25. Within the top 10, South Korea, Singapore, and China rank fourth, fifth, and 10th, respectively, with China entering the top 10 for the first time. The Shenzhen-Hong Kong-Guangzhou innovation cluster surpassed Japan's Tokyo-Yokohama cluster for the first time, jumping to the top of the global list of top 100 innovation clusters, becoming the world's largest innovation cluster.

Second, abundant human capital. Among Asian countries, South Asia and Southeast Asia have relatively young populations and flexible labor markets. The "Global Talent Flow Trends and Development Report 2025" released by the International Talent Organization Federation in June 2025 shows that among the top 10 countries in the world's major countries' talent competitiveness index, Asia holds four spots, with South Korea, Japan, and China ranking second, fourth, and fifth, respectively. The talent center is showing a trend of diffusion from Europe and America to Asia. China, India, Japan, and South Korea rank first, third, fourth, and fifth, respectively in terms of talent pool size. It has become an indisputable fact that the world's talent center is shifting from Europe and America to Asia.

Third, artificial intelligence has become an important engine for regional economic growth. The "Global AI Innovation Index Report 2025" released at the World Artificial Intelligence Conference in July 2025 shows that Asian countries account for half of the top 10 countries, having achieved remarkable results in AI development.

According to the "e-Conomy SEA 2024" report jointly released by Google, Temasek, and Bain & Company, in the first half of 2024, Southeast Asia successfully attracted over $30 billion in AI infrastructure investment. It is predicted that by 2030, AI is expected to increase the GDP of Southeast Asia by 10 percent to 18 percent, potentially adding up to $1 trillion in value. The largely negotiated Digital Economy Framework Agreement is expected to further strengthen cross-border data collaborative governance and promote the establishment of more reliable and precise AI systems.

How to cooperate

The Third Plenary Session of the 20th CPC Central Committee decided to "accelerate the formation of production relations that are more adapted to new quality productive forces, promote the gathering of various advanced production factors toward developing new quality productive forces, and significantly enhance total factor productivity."

In 2024, Asia contributed 60 percent to world economic growth, and the process of regional economic integration continues to advance, providing unique opportunities of the times for the growth and development of new quality productive forces in regional countries.

We should strengthen cooperation with neighboring countries to improve TFP and consolidate the foundation for high-quality economic development. China should continue to work with Asian countries to high-quality co-build the Belt and Road Initiative and promote the better implementation of the Global Development Initiative. It should actively advance the construction of the China-ASEAN Free Trade Area 3.0，fully implement the Regional Comprehensive Economic Partnership Agreement，and create new areas for growth in AI cooperation. It should promote talent flow between China and Asian countries, attract leading innovative and entrepreneurial talents, and build multi-level, comprehensive channels for talent introduction.

At the same time, it should steadily expand the opening-up of service industries such as finance, trade, logistics, and information services, especially conducting exchanges with Asian countries in service sectors like healthcare, education, and elderly care, to promote the formation of a large market. It should vigorously promote the development of new forms and models of foreign trade, such as cross-border e-commerce and overseas warehouses. It should leverage the pilot and leading role of pilot free trade zones and free trade ports to enhance the level of cross-border electronic trade. It should strengthen supply chain cooperation, making China's large market a market shared with the world, especially Asian countries.

The author is an expert on international relations.?

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