New Productive Forces Gain Currency as Drivers of High-Quality Development

A report from chinadaily.com.cn on Feb. 26th, 2024:

“New productive forces” has become China’s newest buzz-phrase ever since it was frequently mentioned by the Chinese leadership and the authorities concerned like local governments in their new-year economic growth plans.

Compared with traditional productive tools that are driven by elements like labor, land and capital, new productive forces refer to a new form of productive forces that are led by technological innovation and new elements like data.

At a time when China’s economy has been rattled by the ailing property market, decreasing private investment and aging population — all of which are traditional productive tools — as well as rising external geopolitical tensions, new productive forces could help sharpen focus on the ways and means of finding economic momentum, industry experts said.

They said they believe that China’s emphasis on new productive forces can accelerate the development of future-oriented industries and key technologies, and thereby promote modern industrial development and help advance the world’s second-largest economy on the global value chain.

China aims to scale up its R&D budget by more than 7 percent annually during the 14th Five-Year Plan period (2021-25). Consultancy McKinsey & Co said in a report that such a growth target will make China the world’s largest R&D spender.

“Although the R&D intensity of China has been continuously increasing, the country’s investment in fundamental research is insufficient, which directly leads to a relative lack of innovations based on complex, underlying supporting technologies and scientific research,” said Liu Qiao, dean of the Guanghua School of Management of Peking University, in a note.

Liu said China’s position index in the global value chain or GVC in 2018 was 0.01 while the US index was 0.29. Thus, the US continues to be at the absolute upstream of the GVC, with strong control over core technologies and raw materials. This gives it the power to create constraints downstream on other countries and economies in the GVC.

“To change this situation, China must increase investment in fundamental R&D and promote Chinese industries to move upstream in the global value chain. Only when breakthroughs are achieved in fundamental research can we truly break developed countries’ vice-like grip on key technologies,” he said.