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New Productive Forces Reshape China's Economic Landscape

By Xinhua|Feb 07,2024

Visitors watch a robot welding an auto body during the 23rd China International Industry Fair (CIIF) in east China's Shanghai, Sept. 19, 2023. (Photo/Xinhua)

Beijing - State-of-the-art intelligent connected vehicles, bleeding-edge quantum computers and futuristic industrial robots -- these are some examples of where China aspires to seek new sources of growth amid economic challenges.

Developing new productive forces, a recent catchphrase in China's policy-making, is among the priorities for this year's economic work mapped out by a tone-setting conference held last December.

By underscoring this concept, China aims to foster advanced productivity through revolutionary technology breakthroughs, innovative allocation of production factors and deepened industrial upgrading.

With the rapid development of strategic emerging industries and future industries such as new energy and quantum technology, along with traditional industries becoming smarter and more innovative, China's economic landscape is shifting.

"China has immeasurable potential and strong competitive edges in developing new productive forces, which could become a new growth pole of the Chinese economy in the near future," said Ming Ming, chief economist at CITIC Securities.

Chasing new growth

High-tech industries have become a focus of local governments' efforts to bolster the economy as authorities eye new growth engines amid domestic and external uncertainties.

In early January, east China's Hefei city launched its first group of major projects for this year, with over 80 percent of the total 36.7 billion-yuan (about 5.2 billion U.S. dollars) industrial investment going to new energy vehicles (NEVs), new-generation information technology and photovoltaic sectors.

In central China's Henan Province, contracts worth nearly 600 billion yuan were signed at the start of the year for projects in advanced manufacturing and strategic emerging industries. In Xiamen city of east China's Fujian Province, new energy, new materials and biomedicine projects were among the 53 billion-yuan industrial projects launched for the new year.

Yuhan Zhang, a political economist at the University of California, Berkeley, wrote in an article in the Financial Times that the local investment projects launched at the start of 2024 have a distinctly scientific flavour, focusing on new-generation information technology, biopharmaceuticals, artificial intelligence and low-carbon energies.

"This suggests an ambition to ascend the value chain and develop new growth engines," Zhang wrote.

Developing new productive forces has become the theme of economic development in 2024 for many local governments, which put sci-tech innovation high on their agenda during the local "two sessions", said Zhao Gang, an analyst at the Beijing-based consultancy firm CIO Manage.

Shanghai has announced it will accelerate its bid to become an international center of sci-tech innovation this year. Liaoning Province will support the development of new materials, aerospace, low-altitude economy and robotics industry. Beijing plans to advance major integrated circuit projects and high-end medical equipment development, as well as other tech-intensive industries.

Employees work on a production line of display screens at a company in Yaohai District, Hefei, east China's Anhui Province, Nov. 16, 2023. (Photo/Xinhua)

Broad prospects

Nationwide, China has demonstrated "strong momentum and broad prospects" in the development of new productive forces, the backbone of which are strategic emerging industries and future industries, said Cai Wei, chief strategy officer of KPMG China Advisory.

The share of strategic emerging industries, such as new energy, high-end equipment and biotechnology, in China's gross domestic product (GDP) rose to over 13 percent in 2022 from 7.6 percent in 2014, Cai said, citing official data. China plans to raise that ratio to over 17 percent by 2025.

Cai believes new productive forces are likely to see larger-scale expansion and innovation in the coming few years, noting particularly strong performance from the new energy, information technology and biological industries.

China has revved up financing and improved the business environment to spur sci-tech innovation, which is key to the cultivation of new productive forces.

China ranked 12th place in the 2023 Global Innovation Index, and became the country with the largest number of top 100 sci-tech innovation clusters in the world for the first time, according to the latest ranking by the World Intellectual Property Organization.

The country saw 3.33 trillion yuan poured into research and development (R&D) in 2023, accounting for 2.64 percent of the GDP, up from 1.91 percent in 2012. Fixed-asset investment in high-tech industries last year recorded double-digit growth, well above the total investment growth.

In the January-August period of 2023, more than 90 percent of the 243 newly-listed firms on China's A-share market were engaged in strategic emerging industries, mainly new-generation information technology, high-end equipment manufacturing and new materials, according to KPMG research.

The country is also beefing up support for future industries integrated with advanced technology such as metaverse, brain-computer interface and quantum information.

A batch of incubators and pilot zones for future industries would be built by 2025, while breakthroughs would be achieved in about a hundred core technologies in key fields, according to a recent guideline released by the Ministry of Industry and Information Technology and six other ministries and agencies.

Traditional industries are being upgraded for smarter manufacturing at a fast pace. China has built 62 "lighthouse factories", accounting for 40 percent of the global total of such factories selected by the World Economic Forum as representing the highest level of global intelligent manufacturing.

An exhibitor shows intelligent dexterous bionic hands at the second Global Digital Trade Expo in Hangzhou, east China's Zhejiang Province, Nov. 24, 2023. (Photo/Xinhua)

Large talent pool

The expanding new growth momentum derives from China's strengthening of human capital and its increasing status in the global value chain, said Cai.

The number of full-time equivalent R&D personnel in China nearly doubled from 3.247 million in 2012 to 6.354 million in 2022 to rank the first in the world, according to the Ministry of Science and Technology.

The international academic influence of China's top sci-tech talent has continued to grow. The number of Chinese scientists added to the global list of highly cited researchers increased from 111 in 2014 to 1,169 in 2022, ranking second globally.

"Sci-tech innovation ultimately depend on talent, and China's increasing quantity and quality of sci-tech talent will provide strong support for fostering new growth engines," said Yuan Lei, deputy chief of the Institute of Economics of Chinese Academy of Social Sciences.

The advancement of new productive forces signifies that China has made positive progress in replacing its old growth drivers with new ones, laying solid foundation for sustained and healthy development of the economy, said Cai.

The dynamism of the new sectors is attracting an influx of foreign investments. In 2023, high-tech industries drew foreign direct investment worth 423.34 billion yuan, accounting for a record-high 37.3 percent of the total, data from the Ministry of Commerce show.

In just two and a half years, Volkswagen Group has built a hub of intelligent connected vehicles in Hefei of Anhui Province, covering the complete value chain from R&D to manufacturing, sales and services, with total investment exceeding 30 billion yuan.

"We are specifically utilizing new technologies and the outstanding infrastructure of Anhui," said Erwin Gabardi, CEO of Volkswagen Anhui. "We will also benefit from this innovative strength."  


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