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Huang Yiping: Innovation-Driven Growth

Jan 27-2025   



*This article is based on a speech by Huang Yiping, Boya Distinguished Professor of Peking University, Dean of the National School of Development of PKU and Director of Institute of Digital Finance, Peking University.

 

How to Recognize the Important Changes in the New Stage?

There are three changes in China's new stage of economic development that are worth highlighting. First, the change in the cost level. China's cost level has risen, and the low-cost advantage no longer exists. The second is demographic change. The aging of the population poses a big challenge. The third is change in the international market environment: from globalization to the rise of trade protectionism.

 

Why Do We Need to Improve Our Innovation Ability?

To transform the growth model, it is necessary to rely more on innovation and to move from the past's crude factor-input-based growth, which was based on the low-cost-level advantage, to innovation-driven growth. The Fourth Industrial Revolution offers a unique opportunity. Digital technologies such as the internet, blockchain, big data, artificial intelligence, big data analytics and cloud computing can give rise to many new economic forms that have the potential to continue improving efficiency even as the labor force declines.

 

Determinants of Innovation-driven Growth

From an economic perspective, innovation-driven growth is about increasing total factor productivity. A very important way to increase total factor productivity is to increase innovation capacity.

According to Professor Michael Porter of the Harvard Business School, a country's innovation capacity is determined by two main categories of factors: investment in R&D activities and the R&D input-output ratio. In addition, Michael Porter lists some factors that influence the efficiency of innovation, such as the protection of intellectual property, the openness of the economy, the involvement of research institutions, the activity of the private sector, the degree of technological specialization and the stock of knowledge.

 

How Can Innovation-driven Growth Be Achieved?

1. Innovation in artificial intelligence

The development of artificial intelligence is not a simple combination of arithmetic, algorithms, and data. The gap between the development of artificial intelligence in China and the US exists not only in a single field but also in the systematic combination of the above-mentioned three elements and whether this combination can operate smoothly.

2. Advantages and disadvantages of industrial policy

The purpose of industrial policy should be to overcome market failure. Therefore, how to play the role of industrial policy, and make up for the shortcomings of the market, as well as not bringing side effects to the normal operation of the market, is a test of the government's wisdom.

3. the standardization of local government investment

The regulation of local investment promotion laws and regulations, and strictly prohibit illegal and irregular policy concessions, including the establishment of a unified national market and other measures, will play a supporting role in the future of innovation.

4. Private enterprises as the main force of innovation

Private enterprises are the main force of innovation in all countries. Our government has proposed the decision to improve the long-term mechanism for private enterprises to participate in the construction of major national projects. It encourages capable private enterprises to take the lead in undertaking major national technological research tasks, and further opens up major national scientific research infrastructures to private enterprises.

5. Financial Support for Innovative Activities

On the one hand, it is necessary to support capital investment in innovation. On the other hand, it is also necessary to provide good financial services. In the case of financial capital, we should try to regulate it more through market-oriented regulatory means.

6. Maintaining the importance of openness

In the future, it is necessary to adhere to the multilateral framework, and the maintenance of open international trade and the international investment system. At the same time, unilateral opening is not excluded.

Huang Yiping: Innovation-Driven Growth

Jan 27-2025   



*This article is based on a speech by Huang Yiping, Boya Distinguished Professor of Peking University, Dean of the National School of Development of PKU and Director of Institute of Digital Finance, Peking University.

 

How to Recognize the Important Changes in the New Stage?

There are three changes in China's new stage of economic development that are worth highlighting. First, the change in the cost level. China's cost level has risen, and the low-cost advantage no longer exists. The second is demographic change. The aging of the population poses a big challenge. The third is change in the international market environment: from globalization to the rise of trade protectionism.

 

Why Do We Need to Improve Our Innovation Ability?

To transform the growth model, it is necessary to rely more on innovation and to move from the past's crude factor-input-based growth, which was based on the low-cost-level advantage, to innovation-driven growth. The Fourth Industrial Revolution offers a unique opportunity. Digital technologies such as the internet, blockchain, big data, artificial intelligence, big data analytics and cloud computing can give rise to many new economic forms that have the potential to continue improving efficiency even as the labor force declines.

 

Determinants of Innovation-driven Growth

From an economic perspective, innovation-driven growth is about increasing total factor productivity. A very important way to increase total factor productivity is to increase innovation capacity.

According to Professor Michael Porter of the Harvard Business School, a country's innovation capacity is determined by two main categories of factors: investment in R&D activities and the R&D input-output ratio. In addition, Michael Porter lists some factors that influence the efficiency of innovation, such as the protection of intellectual property, the openness of the economy, the involvement of research institutions, the activity of the private sector, the degree of technological specialization and the stock of knowledge.

 

How Can Innovation-driven Growth Be Achieved?

1. Innovation in artificial intelligence

The development of artificial intelligence is not a simple combination of arithmetic, algorithms, and data. The gap between the development of artificial intelligence in China and the US exists not only in a single field but also in the systematic combination of the above-mentioned three elements and whether this combination can operate smoothly.

2. Advantages and disadvantages of industrial policy

The purpose of industrial policy should be to overcome market failure. Therefore, how to play the role of industrial policy, and make up for the shortcomings of the market, as well as not bringing side effects to the normal operation of the market, is a test of the government's wisdom.

3. the standardization of local government investment

The regulation of local investment promotion laws and regulations, and strictly prohibit illegal and irregular policy concessions, including the establishment of a unified national market and other measures, will play a supporting role in the future of innovation.

4. Private enterprises as the main force of innovation

Private enterprises are the main force of innovation in all countries. Our government has proposed the decision to improve the long-term mechanism for private enterprises to participate in the construction of major national projects. It encourages capable private enterprises to take the lead in undertaking major national technological research tasks, and further opens up major national scientific research infrastructures to private enterprises.

5. Financial Support for Innovative Activities

On the one hand, it is necessary to support capital investment in innovation. On the other hand, it is also necessary to provide good financial services. In the case of financial capital, we should try to regulate it more through market-oriented regulatory means.

6. Maintaining the importance of openness

In the future, it is necessary to adhere to the multilateral framework, and the maintenance of open international trade and the international investment system. At the same time, unilateral opening is not excluded.