The huge income gap between north and south countries in the world is one of the most remarkable features of the international community, and narrowing the gap is an important manifestation of practicing the concept of “a community with a shared future for mankind”. Although inequality between north and south countries has improved in recent years, the absolute gap remains large. At the same time, after the 1990s, more and more developing countries began to “de-industrialize” with a declining share of manufacturing. For developing countries that are not yet mature in industrialization, the impact of structural transformation on their economic catch-up is of particular concern. However, existing studies are less concerned with the impact of the transition process from manufacturing to services on economic catch-up, and their impact mechanisms need further research.

To this end, this paper focuses on the impact and mechanism of structural transformation from manufacturing to services and “premature de-industrialization” on economic catch-up based on the panel data of developing countries, and analyzes the impact in the Chinese context. It finds that the structural transformation of manufacturing to services in developing countries hinders their economic catch-up by depressing labor productivity and capital accumulation, and “premature de-industrialization” is more inhibitory. In addition, low agricultural productivity, labor migration across gradients, and artificial intelligence application in developed countries are important factors contributing to the “premature de-industrialization” of developing countries, while higher institutional quality, human capital, and economic development level can mitigate the negative impact of structural transformation. Further research finds that the declining share of manufacturing in China also has a significant dampening effect on economic catch-up, with particular attention to the impact of regional “premature de-industrialization”.

The marginal contributions of this paper are that: First, it introduces a specific process of structural transformation from manufacturing to services to analyze the economic catch-up of developing countries, and extends the analysis with data from China. Second, it precisely identifies the mechanism of action and heterogeneity of action of the structural transformation of manufacturing to services affecting the economic catch-up of developing countries, which enriches the mechanisms of policy intervention. Third, it refines the research perspective to “premature de-industrialization”, which deepens the understanding of the reality in the process of structural transformation in developing countries. Fourth, it explains the underlying reasons for “premature de-industrialization” in terms of agricultural productivity, artificial intelligence application, and labor migration across gradients.