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Crucial Factors for Developing New Productive Forces

Aug 15-2024   



 

At the 2024 Chinese Enterprises’ Competitiveness Annual Conference, Prof. Huang Yiping, Dean of the NSD, shared some of the major findings in the book China 2049 to illustrate the changes in China’s new economic development stage. The book carries the results of a research project jointly conducted by the NSD and the Brookings Institution. Prof. Huang is also Peking University Boya Distinguished Professor and Director of PKU Institute of Digital Finance.

 

Research by Chinese and American experts highlighted three note-worthy shifts as China enters a new phase of economic development: the erosion of its low-cost competitiveness; a shifting international market that has undercut the important role of export and foreign direct investment in China’s economic growth; and an aging population that brings about enormous challenges. In addition, transformation is taking hold in digital technology and green development.

 

What needs to be done to ensure continuous growth? In a nutshell, China 2049 recommends re-molding future growth mode by switching from hitherto low-cost extensive growth to innovation-led development. Prof. Huang pointed out that technological innovation sits right at the core of new productive forces.

 

To spur innovation and enlarge its contribution to total factor productivity, Prof. Huang cited Michael E. Porter’s insight, which attaches particular attention to a country’s degree of openness and its private enterprises’ vitality. He also stressed China’s conspicuous headway in intellectual property of frontier technology while pointing out the need to keep improving its quality. The strong performance of Chinese companies in electric cars, lithium batteries, and photovoltaic panels shows that China has got some things right, he said.

 

On the issue of excess capacity, Prof. Huang analyzed its major causes, including geopolitical conflicts and bandwagon-jumping of capital and local governments. He called for reflection on and adjustment to policy, arguing that government support should focus on overcoming technological bottlenecks and the rest should be trusted to the market and entrepreneurs. He lamented that some lowly factories of new energy products have managed to obtain support from local governments.

 

At its root, overcapacity results from macro-economic imbalances. Prof. Huang believed that achieving a reasonable ratio between investment and consumption is crucial to economic growth. He advocated specific and concrete measures for boosting consumption, including improving social welfare and giving cash handouts to residents, which would stimulate demand and drive the development of new productive forces.

 

As a large economy with trade surplus with many countries, China might be put in a negative light by some countries. Prof. Huang said that it can conduct economic cooperation with trade partners, including investment, aids, and joint development of economic development opportunities. “The Global South Green Development Plan”, inspired by the Marshall Plan, can go a long way in assisting developing countries in their green transition and economic development through commercial tools, policy tools, and even aids. China will also benefit from the initiative by working on its trade surplus and tapping overseas markets to absorb some of its productive capacity. In addition, Prof. Huang believed that the initiative will help some financial tools to set foot in overseas markets, propel the country to moral high ground, and facilitate the implementation of a macro-economic policy that utilizes monetary and financial means to increase both domestic and overseas demand and achieve macro-economic stability domestically.

Crucial Factors for Developing New Productive Forces

Aug 15-2024   



 

At the 2024 Chinese Enterprises’ Competitiveness Annual Conference, Prof. Huang Yiping, Dean of the NSD, shared some of the major findings in the book China 2049 to illustrate the changes in China’s new economic development stage. The book carries the results of a research project jointly conducted by the NSD and the Brookings Institution. Prof. Huang is also Peking University Boya Distinguished Professor and Director of PKU Institute of Digital Finance.

 

Research by Chinese and American experts highlighted three note-worthy shifts as China enters a new phase of economic development: the erosion of its low-cost competitiveness; a shifting international market that has undercut the important role of export and foreign direct investment in China’s economic growth; and an aging population that brings about enormous challenges. In addition, transformation is taking hold in digital technology and green development.

 

What needs to be done to ensure continuous growth? In a nutshell, China 2049 recommends re-molding future growth mode by switching from hitherto low-cost extensive growth to innovation-led development. Prof. Huang pointed out that technological innovation sits right at the core of new productive forces.

 

To spur innovation and enlarge its contribution to total factor productivity, Prof. Huang cited Michael E. Porter’s insight, which attaches particular attention to a country’s degree of openness and its private enterprises’ vitality. He also stressed China’s conspicuous headway in intellectual property of frontier technology while pointing out the need to keep improving its quality. The strong performance of Chinese companies in electric cars, lithium batteries, and photovoltaic panels shows that China has got some things right, he said.

 

On the issue of excess capacity, Prof. Huang analyzed its major causes, including geopolitical conflicts and bandwagon-jumping of capital and local governments. He called for reflection on and adjustment to policy, arguing that government support should focus on overcoming technological bottlenecks and the rest should be trusted to the market and entrepreneurs. He lamented that some lowly factories of new energy products have managed to obtain support from local governments.

 

At its root, overcapacity results from macro-economic imbalances. Prof. Huang believed that achieving a reasonable ratio between investment and consumption is crucial to economic growth. He advocated specific and concrete measures for boosting consumption, including improving social welfare and giving cash handouts to residents, which would stimulate demand and drive the development of new productive forces.

 

As a large economy with trade surplus with many countries, China might be put in a negative light by some countries. Prof. Huang said that it can conduct economic cooperation with trade partners, including investment, aids, and joint development of economic development opportunities. “The Global South Green Development Plan”, inspired by the Marshall Plan, can go a long way in assisting developing countries in their green transition and economic development through commercial tools, policy tools, and even aids. China will also benefit from the initiative by working on its trade surplus and tapping overseas markets to absorb some of its productive capacity. In addition, Prof. Huang believed that the initiative will help some financial tools to set foot in overseas markets, propel the country to moral high ground, and facilitate the implementation of a macro-economic policy that utilizes monetary and financial means to increase both domestic and overseas demand and achieve macro-economic stability domestically.