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China’s massive industrial restructuring—critical to its growth and emergence as a global competitor—is closely linked to an important side effect: China is rapidly losing manufacturing jobs. As its manufacturing productivity accelerates, China is gaining jobs in services, a pattern that has been playing out in the developed world for many years. China is simultaneously experiencing soaring productivity growth, a result of government firm downsizing and foreign and foreign-invested firm upsizing. While their share of industrial output plummeted from 64 percent in 1995 to just 30 percent in 2002, state-owned firms remain an important force in China’s industrial economy.