What is K-shape?

Currently, the “K-shaped” divergence in the global economy has become increasingly evident: while the AI boom is fostering technological prosperity, traditional industries and ordinary workers are also being squeezed by the gap in growth. This stark contrast has rapidly heated up discussions about “K-shaped economics.”

The K-shaped pattern in the economic landscape is not caused by short-term market volatility; its deeper root lies in the iteration of new and old technological paradigms under the Kondratieff long-wave cycle. However, it does not stem from that alone—it is also driven by the advent of the digital economy era, where digital technologies are not broadly accessible.

1. Tracing the origins of K-shaped divergence in the economy—shifts in technological paradigms within the Kondratieff cycle

In 1925, Kondratieff first proposed the theory of economic long-wave cycles, whose core driving force was disruptive technological revolutions. Each upswing cycle of the Kondratieff cycle corresponds to a pivotal technological-economic paradigm shift: emerging economic sectors that adapt to new technological paradigms and embrace technological change can leverage technology dividends to continuously improve production efficiency, keep long-term investment returns rising steadily, attract capital in droves, and thereby experience explosive growth; while traditional industrial sectors that cling to older technologies and production models, unable to complete transformation and upgrading, are constrained by factors such as efficiency lag, excess capacity, and demand iteration, causing investment returns to keep falling and growth space to be steadily squeezed. In other words, the Kondratieff cycle is, in essence, a process of economic system metabolism and structural transformation: old economic structures are eliminated and disrupted, gradually moving from the center to the margins, while new structures are created and formed. Put another way, it is a process of creative destruction, and the natural switching of new and old growth drivers naturally nurtures the seeds of divergence.

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