Editor's note: Dong Yu is the executive deputy director of the China Institute for Development Planning, Tsinghua University, and the vice president of the Chinese Society for Study of the Private Economy. The article, first published in Chinese in People's Daily and republished with permission, reflects the author's opinions and not necessarily the views of CGTN. It has been translated from Chinese and edited for brevity and clarity.

A "K-shaped divergence" has been a buzzword in online discussions and some market analyses for a while.

Some analysts have simply applied Western economic narratives to China. They interpret differences that have emerged during the country's economic transformation – including divergent fortunes across industries, uneven regional growth and varying financial outcomes for individuals — as evidence of entrenched economic polarization and a permanent divide between the strong and the weak. 

Some have gone further, depicting an increasingly bleak picture of growing antagonism between traditional and emerging industries, widening disparities between large and small businesses, and a steadily expanding wealth gap.

Although these views are not entirely without a basis in reality, they mix appearances with underlying dynamics and short-term fluctuations with long-term trends. 

By equating the temporary disparities that arise during economic transition to lasting structural divides, they offer a one-sided account of how China's economy operates and therefore warrant clarification and closer scrutiny.

The concept of a "K-shaped recovery" emerged after the outbreak of the COVID-19 pandemic. 

Put forward by Wall Street institutions and later gaining traction in Western public discourse, this narrative describes a scenario in which capital becomes increasingly concentrated in the financial sector and leading corporations, accompanied by a relative shrinking of the middle class. 

In some Western countries following the crisis, large corporations, technology tycoons and high-income groups recovered rapidly along the upward arm of the "K-shaped" divergence, while small and medium-sized enterprises (SMEs), traditional industries, and ordinary wage earners continued to slide along its downward arm. Within the rigid institutional structures of these countries, this divergence can become self-reinforcing, eventually evolving into socioeconomic divides that are difficult to bridge.

Measuring China's economy with this "Western yardstick" is a case of mechanically transplanting a methodological framework without due regard for local conditions.

Over more than four decades of reform and opening-up, China's economy has undergone a historic shift from extensive growth driven by scale and speed to intensive growth focused on quality and efficiency.

Today, "new quality productive forces" are developing rapidly in China.

Some emerging industries are growing at a brisk pace, China's foreign trade exports continue to set records, and innovation is playing an increasingly important role as a growth engine. 

At the same time, the real estate market is undergoing a deep adjustment, some labor-intensive industries are under pressure, and certain businesses and groups are feeling the strain on their operations and incomes. These contrasting structural differences, where some sectors are expanding while others contract, some growing faster while others lag, and new industries advancing as traditional ones adjust, are, in essence, the growing pains of transitioning from old growth drivers to new ones. They are a normal part of economic development, not evidence that the economy's underlying structure is fracturing. 

Using the same "K-shaped divergence" to describe these changes in China's economy leads to at least three key misconceptions.

The first misconception is allowing local setbacks to obscure the global picture.

The fortunes of individual industries, regions or groups alone cannot judge the overall state of the macroeconomy. 

Key indicators show that China's economy remains broadly stable. GDP grew by 4.7% in the first half of the year, remaining within a reasonable range. New growth drivers, represented by advanced manufacturing, the digital and intelligent economy, as well as modern services, contributed more than 40% of overall economic growth, signaling a clear and accelerating shift toward new, higher-quality growth. 

The urban surveyed unemployment rate held steady near 5%, maintaining overall stability in employment. Furthermore, China firmly safeguarded baseline security in food, energy, and industrial supply chains. In July this year, the International Monetary Fund also raised its growth forecast for China. Fixating solely on the downward side of this picture is plainly a case of mistaking the part for the whole.

The second misconception is underestimating the capacity of traditional industries to transform and upgrade.

Some commentators, whether deliberately or inadvertently, have fueled the "K-shaped divergence" narrative, implying that the divide will only widen, thus unsettling certain groups' expectations. 

Traditional industries in China are indeed transforming and developing, but that does not mean they are destined to decline. 

On the contrary, China is placing considerable emphasis on digital transformation, intelligent upgrading and green transition. 

As a result, many traditional enterprises are cutting costs, boosting efficiency and exploring new markets through technological upgrades, process improvements, and innovative forms of business.

In this way, they are moving from low-end, extensive production toward higher-value, higher-quality development. The phasing out of outdated production capacity and inefficient business models in this process is a positive sign of industrial renewal and efforts to improve quality and efficiency. 

Focusing solely on the pain of adjustment while ignoring the broader efforts to transform and upgrade inevitably yields a distorted assessment.

The third misconception is overlooking the Chinese economy's capacity to narrow disparities and restore balance from within.

The concept of a "K-shaped divergence" assumes that the benefits of emerging industries will accrue only to a handful of leading companies and high-end segments, with differentials growing ever wider and becoming entrenched. 

This analysis ignores the fact that, supported by China's comprehensive industrial system, vast domestic market and well-functioning economic circulation, the benefits of new growth drivers extend far beyond emerging industries themselves. 

Through supply-chain linkages and collaboration, these benefits spread to a vast network of SMEs. 

Technology spillovers and the movement of talent carry them into broader sectors, while the expansion of new application scenarios extends them to lower-tier markets. 

Ultimately, they manifest as widespread improvements in business vitality, worker incomes and household purchasing power across the economy.

In other words, the stronger the new growth drivers become, the more widely the benefits of growth can be shared. Objectively speaking, such convergence takes time. As high-quality development advances, the disparities that emerge during the transition will inevitably narrow.

A key starting point for understanding “K-shaped divergence” is recognizing that China has institutional advantages that Western economies lack and places greater emphasis on fairness and inclusiveness in development. 

While economic policy ultimately seeks to improve people's livelihoods, this does not mean flattening legitimate differences between industries or abandoning the market process through which more competitive businesses succeed and less competitive ones fall behind. 

To prevent a "winner-takes-all" outcome as new growth drivers gain strength, China can use antitrust enforcement, fair competition reviews and policies supporting SMEs to prevent leading companies from leveraging their technological and financial advantages to squeeze supporting enterprises excessively. 

At the same time, sound mechanisms for wage growth and broader social security coverage can help translate the benefits of industrial development into rising incomes for urban and rural residents. 

By remaining firmly committed to a people-centered philosophy of development, China can effectively prevent the structural flaws typical of Western "K-shaped" dynamics, such as entrenched class divisions, industrial fragmentation and social polarization, at their very source.

Of course, dispelling the misconceptions surrounding "K-shaped divergence" does not mean ignoring real-world challenges. 

We can clearly see that bottlenecks still exist in the transition from old growth drivers to new ones, the recovery in domestic demand still rests on a fragile foundation, and many micro, small and medium-sized enterprises face considerable operating pressures. Regional, urban-rural, and industrial imbalances require ongoing effort to resolve, while mitigating risks in key areas will demand sustained, long-term commitment. Recognizing these problems and addressing these shortcomings are essential to formulating targeted policies and driving economic recovery. However, the answer is not to import pessimistic Western narratives that fuel anxiety and exaggerate divisions. 

Instead, it is essential to unwaveringly deepen reform and expand opening-up, continuously foster "new quality productive forces," transform and upgrade traditional industries, improve economic circulation and optimize income distribution, so the benefits of high-quality development reach all people more widely and equitably.