LIRNEasia’s future work will focus on knowledge-based economies, which makes us very interested in stories like this, which place innovation at the center. China’s productivity has been lifted by a massive expansion of private enterprise, and a shift of labour out of agricultural work and into more productive jobs in industry. China’s average return on physical capital is now well above the global average, according to Goldman Sachs. A decade ago it was less than half the world average. Why have the Asian economies led the pack?