We are pleased to publish this important article from the latest English language edition of Qiushi, the main theoretical journal of the Communist Party of China. It presents a comprehensive and detailed outline of China’s new development dynamic, focused on the domestic economy. It draws attention to China’s decreased reliance on foreign trade, which peaked in 2006. The article deals frankly with the challenges faced and the problems needing to be tackled on both the domestic and international fronts, but also explains how these can be overcome on the basis of the growing prosperity of China and the inherent strengths of the socialist system. It deserves careful reading.
While addressing a seminar for principal provincial- and ministerial-level leaders on the guiding principles of the Fifth Plenary Session of the 19th CPC Central Committee on January 11, 2021, General Secretary Xi Jinping stressed that moving faster to foster a new development dynamic dominated by the flows of the domestic economy but in which domestic and international flows are mutually reinforcing is a major strategic task proposed by the CPC Central Committee in its Recommendations for the 14th Five-Year Plan for Economic and Social Development that concerns the overall development interests of the country. We must acquire an accurate understanding of this task from an overall perspective and actively promote its advancement.
I. Fully understanding the significance of fostering a new development dynamic
The decision to create a new development dynamic clarifies the path that China will take to economic modernization. The CPC Central Committee made this major decision after assessing China’s development stage, environment, conditions, tasks, and requirements, and particularly the changes in its comparative strengths. As a strategic plan for seizing the initiative in future development, it holds great and far-reaching significance for China’s efforts to achieve higher quality, more efficient, fairer, more sustainable, and more secure development.
Fostering a new development dynamic is about making an active choice to adapt to the demands of this new stage of development.
A hallmark of major-country economies is that they can function as a circulating loop due to the dominant role of domestic demand. Since the 18th National Congress of the CPC in 2012, China has pursued a strategy of expanding domestic demand, with the aim of making development more reliant on domestic demand, and consumer demand in particular. Between 2012 and 2020, China’s dependence on foreign trade fell from 47.3% to 31.7%, continuing a trend that first emerged in 2006 when China’s reliance on foreign trade peaked. In four of the past nine years, domestic demand has contributed to economic growth at a rate of over 100%, which has helped boost the dynamism of domestic economic flows significantly. In recent years, owing to a backlash against economic globalization, an inward turn in the policies of certain major countries, and profound adjustments to international flows, China has seen a clear weakening in its development model based on large-scale imports and exports with the two ends of the economic process — markets and resources — located overseas. As China advances toward the Second Centenary Goal of building a modern socialist country in all respects, after securing decisive achievements in building a moderately prosperous society, profound changes are occurring in the composition of its domestic demand, the structure of its industry, its technology systems, and its growth drivers. In line with the laws governing the development of major countries, China must proactively adjust the relationship between the domestic and international economies. Based on these new circumstances and tasks, it has put forward a new approach for steering development.
Fostering a new development dynamic is a major measure for achieving full implementation of the new development philosophy.
Since the CPC’s 18th National Congress, the CPC Central Committee with Xi Jinping at the core has put forward many major theories and concepts on economic and social development. Of these, the new development philosophy is the most important. All sectors have reached a high degree of consensus on this philosophy and continuously deepened its application. At present, however, imbalanced and insufficient development remains a prominent issue, and our country’s innovation capacities are still not fully adapted to the requirements for high-quality development. Large gaps persist among different geographical regions, urban and rural areas, and the incomes of different groups. In ecological and environmental protection, China still has a long and formidable road to travel, and it is falling short in many areas concerning people’s wellbeing and social governance. We must commit to a system approach, remain goal- and problem-oriented, and properly handle the relationships between present and longterm concerns, self-reliance and openness, the roles of the government and the market, national and local needs, and development and security. In doing so, we can clear blockages, address shortcomings, and promote unimpeded flows in the economy, continuously enhance the quality and efficiency of development, and continue to deepen the implementation of the new development philosophy.
Fostering a new development dynamic is essential for adapting to profound changes in the international environment.
Currently, the international balance of power is undergoing historic changes, and the international political and economic environment is becoming more complex. With the world entering a period of increasing fluidity and change, China is going to face much stronger headwinds and countercurrents in its external environment, meaning it must be prepared to handle a whole series of new risks and challenges. From a development and security perspective, these shifts mean that we will need to plan development with a stronger domestic focus, and expedite our efforts to clear core technology bottlenecks in key fields and to address the excessively high rate of overseas procurement for certain products. As we work to keep the domestic economic flow unimpeded, we will promote the robust flows and solid fundamentals needed to boost the economy’s capacity to withstand shocks. Only in this way can China enhance its ability to survive, compete, and maintain sustainable development. This will ensure we always have the vigor and vitality to not only survive but thrive amid volatile international situations. At the same time, we must strive to maintain the strategic initiative in open development, make full use of the resources of the international and domestic markets, and promote a higher level of opening up to the outside world. We should harness international economic flows as a means for boosting the efficiency and level of domestic flows and the quality and allocation of China’s production factors. This will enable China to forge new strengths in international competition and development.
II. Accurately grasping the opportunities and challenges involved in creating a new development dynamic
China remains in a period of important strategic opportunity for development and the situation will continue for some time to come. But the opportunities and challenges China faces are changing. We possess a solid foundation and considerable advantages for creating a new development dynamic. Overall, our opportunities outweigh our challenges; they are more strategic and malleable in nature, while our challenges are more complex and overarching. If we respond well to these unprecedented challenges, we will also enjoy unprecedented opportunities.
From an international perspective, the world is experiencing accelerated change unseen in a century, with profound adjustments occurring on the international economic, technological, political, and security landscapes.
First, Covid-19 has accelerated the evolution of the world economy. The expectations are that the world economy will begin growing again after a sharp decline. However, developed economies are on noticeably divergent trajectories, while emerging economies and developing countries are contending with more difficulties in their economic recoveries. Second, the division of labor in the global industrial chain is undergoing an accelerated adjustment. Countries are paying more attention to the security of their supply chains, and the trends of regionalizing and localizing production networks have become more noticeable. The new round of scientific and technological revolution and industrial transformation is pushing deeper, and countries are competing more intensely to seize the high ground in the latest science and technologies. Third, economic globalization is enduring a backlash. Some advanced economies have implemented trade protection policies and promoted the establishment of exclusive and protective regional trade agreements. Emerging economies are facing a higher regulatory bar for trade and investment. Fourth, traditional and non-traditional security risks have become interwoven and are spreading. Unilateralism, protectionism, and hegemonism threaten world peace and development. Non-traditional security risks such as terrorism, climate change, major infectious diseases, and cybersecurity threats have also increased significantly.
From a domestic perspective, China has entered a critical stage for transforming its growth model, enhancing the economic structure, and fostering new growth drivers, in which structural, institutional, and cyclical issues overlap.
First, we need to further cement the foundation of domestic economic recovery. Obstructions in the economy are disappearing more quickly, and market expectations continue to improve. Yet, domestic demand remains constrained, household consumption is lagging, and enterprises, especially manufacturing firms, are showing a weak appetite for investment. Second, we need to improve the quality and efficiency of development. Control over certain core technologies in key fields lies with other countries, and we have to rely on imports for certain key components, parts, and materials. There is an excess of low-end, ineffective supply and a lack of mid-to-high-end, effective supply, while development in finance, real estate, and the real economy are unbalanced. Third, we must give due attention to risks in key areas. The balance between the supply and demand for food remains tight. The rate of procurement for foreign oil and gas is relatively high, and many challenges exist in energy resource security. The macro-leverage ratio is still high, risks related to banks’ non-performing loans may continue to emerge, and some enterprises face many difficulties in their production and business operations. Fourth, there are still shortcomings in meeting people’s basic needs. Employment pressure and recruitment difficulties coexist. The number of entrants to the labor force is still high, while recruitment problems in manufacturing and small- and medium-sized enterprises have become more prominent. The imbalance between the supply and demand of public services is still pronounced, population aging is intensifying, and the old-age dependency ratio continues to rise, posing more significant challenges to the sustainability of old-age security.
While recognizing these risks and challenges, we must also see that China has entered a stage of high-quality development and enjoys advantages and conditions in many areas that are favorable for the creation of a new development dynamic.
China has the strong leadership of the CPC Central Committee led by Xi Jinping and the guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era. When difficult and complex situations arise, our people can pull together and channel their collective energies to keep forging ahead. These are China’s greatest advantages in development. Thanks to the significant strengths of the socialist system with Chinese characteristics, China has made strong progress in modernizing its system and capacity for governance, and its systems in all respects are now more mature and well-defined. China has continuously improved its systems and mechanisms for preventing and defusing major risks, significantly enhanced its public emergency response capabilities, and bolstered its security guarantees. We also possess a solid material foundation. Total grain output has exceeded 650 million metric tons for the last six consecutive years, and China ranks first in the world in terms of output for over 220 industrial products. It has the longest high-speed rail network, the longest highway network, and the most 5G terminal connections of any country in the world. All of this creates a solid foundation for achieving high-quality development. China also has the largest and most promising consumer market in the world. It has a population of 1.4 billion and a middle-income group of more than 400 million people. It is home to more than 130 million market entities and more than 170 million people with higher education or professional skills. Thanks to its ability to fully tap into the economies of scale and agglomeration effects enjoyed by major countries, it will be able to take strong steps toward creating a new development dynamic.
III. Using the new development philosophy to guide efforts to foster a new development dynamic
Fostering a new development dynamic is a systematic project. In implementing this project, we must apply the new development philosophy fully and faithfully, at every stage and aspect of development. We should identify key areas and potential breakthrough points for accelerating this process, and fully implement all plans of the CPC Central Committee and the State Council.
We should promote innovation-driven development and reinforce the principal role of domestic economic flows.
Innovation is the basic ability that will determine China’s survival and development. It is the key to ensuring unimpeded circulation in the domestic economy and to shaping new strengths for China in the international economy. To accelerate the creation of a new development dynamic, we need to strengthen our science and technology to provide strategic support for development, and create high-quality supply that can satisfy, steer, and create new demand. With this, we will give rise to a powerful domestic market in which consumption and investment are mutually reinforcing. By accelerating improvements to the systems and mechanisms for scientific and technological innovation, we can bolster the nation’s strategic capabilities in science and technology, boost the innovation capabilities of enterprises, and spark the creative potential of individuals. To accelerate the development of a modern industrial system, we should optimize and upgrade industrial and supply chains, build up strategic emerging industries, and work toward a dynamic supply and demand equilibrium where demand drives supply, and supply in turn creates new demand. As we move faster to develop a complete domestic demand system, we should align the strategy on expanding domestic demand with supply-side structural reform. Keeping the focus on improving the people’s wellbeing, we should work to boost traditional consumption, foster new types of consumption, promote the consumption of services, and appropriately increase public consumption. Promoting positive interplay between consumption and investment, we should intensify investment in areas of weakness, develop a modern network for flows of goods and services, and promote the development of new types of infrastructure, new urbanization, and transportation and water conservancy projects.
We should pursue high-level opening up to the outside world and see that domestic and international economic flows reinforce each other.
Opening up is an important channel for pushing forward reform and development, giving full play to China’s comparative strengths, and ensuring more efficient resource allocation. To speed up the creation of a new development dynamic, we must focus on promoting positive interplay between the domestic and international economic flows, pursue further opening up on a larger scale in more areas, and promote international cooperation to open a new phase of win-win outcomes. We should strengthen China’s competitiveness in foreign trade by promoting the transformation and upgrading of foreign trade enterprises and optimizing fiscal and taxation policies to promote foreign trade. To liberalize and facilitate trade and investment, we should further shorten the negative list for foreign investment, implement post-establishment national treatment, improve the layout of pilot free trade zones, and steadily promote the development of the Hainan Free Trade Port. We should promote the high-quality development of the Belt and Road Initiative (BRI), strengthen the alignment of development strategies and policies between participant countries, and promote infrastructure connectivity and cooperation on production capacity. China will actively participate in the reform and development of the global governance system and promote a global community with a shared future.
We should promote coordinated development between urban and rural areas and strengthen the drivers of development.
This task embodies our efforts to spur domestic economic flows on the basis of a unified national market. To accelerate the creation of a new development dynamic, we need to better coordinate development in urban and rural areas and among regions, and to improve the spatial layout. We should modernize agriculture and rural areas, bolster supply-side structural reform in agriculture, adjust the structure and regional layout of agricultural production, enhance the systems and mechanisms for integrated urban-rural development, and align efforts to consolidate and expand progress in poverty alleviation with rural revitalization. We must resolutely implement major strategies for regional development and strategies for coordinated regional development, and improve the mechanisms for coordinated regional development, so as to create a regional economic framework featuring complementary strengths and high-quality development. In promoting people-centered new urbanization, we need to continue reforming the household registration system, improve the systems and mechanisms for the integrated development of city clusters, and promote the coordinated development of cities of different sizes and small towns. To ensure that development is suited to local conditions, we should work to foster regional structures in which urbanized areas, major agricultural areas, and key ecosystem service zones complement each other’s strengths.
We should vigorously promote green and low-carbon development and enhance harmony between humanity and nature.
This is vital for improving the quality and efficiency of domestic economic flows. As we move faster to foster a new development dynamic, we must insist on respecting nature, protecting it, and following its ways. It is imperative that we promote ecological conservation and pursue green and low-carbon development. To keep improving the environment, we need to ramp up pollution prevention and control activities, comprehensively improve environmental infrastructure, and refine systems for reducing total energy consumption and energy intensity. An action plan will be drawn up for achieving peak carbon emissions by 2030 and reaching carbon neutrality by 2060. We should expedite our transition to a green development model, resolutely curb the unchecked development of energy-intensive, high-emission projects, and promote green transformations in key industries and important fields. We should promote the efficient use of resources in a holistic way, accelerate the development of a system for reusing and recycling waste materials, and see that waste is either recycled or safely disposed of.
We should ensure and improve people’s wellbeing and see that people gain a stronger sense of fulfillment, happiness, and security.
This is the ultimate goal of promoting unimpeded circulation of the domestic economy, as well as a key link where domestic and international flows reinforce each other. To accelerate the creation of a new development dynamic, we must adhere to a people-centered development philosophy. Public services should be inclusive, meet essential needs, and ensure basic living standards for people in difficulty, and development should come to benefit all of our people in a fuller and fairer way. We must give more priority to promoting common prosperity for all. We should explore effective ways of achieving this through the development of demonstration zones. We should improve income distribution, allow the market to evaluate and award the contributions of factors of production, increase the share of wages in primary distribution, and improve the mechanism for income redistribution. We need to improve the quality and level of public services, move faster to address the shortcomings in basic public services, continue to implement the employment-first strategy, and accelerate our efforts to build a sustainable multi-tiered social security system that covers all people in urban and rural areas and that is fair and fully unified.
We should promote both development and security and bolster our national economic security.
This is an important prerequisite and guarantee for creating a new development dynamic, as well as a central focus in promoting unimpeded flow of the domestic economy. When accelerating the creation of a new development dynamic, we must keep in mind potential dangers and worst-case scenarios and be prepared to deal with more complex and difficult situations at all times. With a focus on the two key areas of cultivated land and seeds, we should further implement the food crop production strategy based on farmland management and the application of technology. We must strictly adhere to the red line of maintaining 120 million hectares for farming, carry out national initiatives for protecting chernozem soils, and endeavor to upgrade the modern seed industry and tackle technology bottlenecks in seed production. We should further the reform of purchase and storage systems for grain and other agricultural products and ensure basic self-sufficiency in cereal grains and absolute food security. Based on domestic needs, we should improve the energy supply, storage, and sales systems by shoring up weaknesses, diversifying guarantees, and strengthening reserves; we should optimize the energy mix and enhance China’s ability to ensure stable energy supplies and control risks. We need to enhance basic industrial capacities, upgrade industrial chains, ensure solid progress in research on core technologies in key fields, and build independent, controllable, secure, and efficient industrial and supply chains to enhance the ability of the industrial system to resist shocks. We should actively participate in cooperation to prevent and defuse latent risk and hazards in key areas such as public finance, the financial sector, and real estate, and work to resolutely prevent the occurrence of systemic risks. We will ensure that risks related to the BRI are also well-controlled.