Supply-side reform has laid the foundation for China's high-quality development

Editor's note: Liu Chunsheng, a special commentator on current affairs for CGTN, is an associate professor at the Central University of Finance and Economics in Beijing. The article reflects the author's opinion, and not necessarily the views of CGTN.

In response to the increasing structural contradictions of China's economic development in the new normal, the transformation of economic growth drivers from factor-driven to innovation-driven, and the transition from an extensive growth mode to an intensive growth mode have become the main focus. The supply-side structural reform was proposed by the Chinese government in 2015 to optimize the supply structure, promote the transformation of the economic development model, improve total factor productivity, and provide support for high-quality economic development.

China has implemented large-scale capacity reduction policies in the past few years, eliminating inefficient capacity in industries with overcapacity. This has stimulated adjustments and optimization of the industry structure, driving the transition from traditional industries to emerging and high value-added industries, which helps improve economic competitiveness and innovation capabilities, reducing dependence on traditional resource-intensive industries. From 2016 to 2020, China eliminated over 150 million tonnes of steel overcapacity and 300 million tonnes of cement overcapacity. "Substandard steel" was completely phased out, and outdated capacity in industries like electrolytic aluminum and cement was largely cleared. Simultaneously, support for high-tech industries, green industries, and emerging industries has been strengthened, with a focus on fostering fields such as next-generation information technology, artificial intelligence, and high-end equipment manufacturing.

Since 2018, China has implemented a series of tax and fee reduction policies to reduce the tax and social insurance costs for enterprises, alleviating their burdens and increasing their production and innovation capabilities. The manufacturing industry has benefited the most from these policies, with over 3.5 trillion yuan ($480 billion) in cumulative tax and fee reductions, refunds, and deferred payments. These policies have significantly reduced the tax burden on enterprise operations. According to data from the State Taxation Administration, the tax burdens on manufacturing enterprises decreased by 23.3 percent on average from 2017 to 2022, with the equipment manufacturing industry experiencing the largest decrease at 29.5 percent. Supported by these tax policies, the manufacturing industry has achieved stable and remarkable progress. Sales revenue for manufacturing enterprises grew by an average of 9.4 percent per year from 2018 to 2022, with the equipment manufacturing industry's sales revenue growing by an average of 10.3 percent per year. The proportion of value added by the manufacturing industry to GDP increased by 1.4 percentage points from 2020 to 2022, reaching 27.7 percent. The measures have boosted market confidence, stimulated entrepreneurship and innovation, and provided support for economic stability and sustainable development.

China encourages technological innovation and the protection of intellectual property rights, intensifying support for emerging industries and high-tech industries to promote high-end and high-quality development of the supply structure. China has established a series of innovation funds to support technological innovation projects and research and development activities. Investment in universities and research institutes has been increased, and national-level high-tech enterprise incubators have been established to facilitate the transformation of scientific and technological achievements and promote innovation and entrepreneurship. China has also strengthened legislation on intellectual property and judicial protection of intellectual property rights, establishing several intellectual property protection centers and courts. According to the National Bureau of Statistics, in 2022, China's total research and development (R&D) expenditure accounted for 2.54 percent of its GDP, ranking 13th in the world in terms of R&D intensity. As of September 2023, China had 4.8 million valid invention patents and 45.1 million registered trademarks. Annual copyright registrations reached 6.35 million in 2022, whereas the country's PCT international patent applications ranked first for four consecutive years. In 2023, China ranked 12th in the Global Innovation Index released by the World Intellectual Property Organization, while ranking first for hosting the most number of top 100 scientific and technological innovation clusters globally for the first time.

The supply-side reform has also provided strong support for the progress of China's dual-carbon strategy. By eliminating outdated capacity and raising environmental requirements, supply from high-carbon emission industries has been reduced, fundamentally lowering the emissions of carbon dioxide and other greenhouse gases. Policies such as R&D support, tax and fee incentives, and financial assistance have encouraged the production and application of low-carbon technologies and clean energy, enhancing the supply capacity of low-carbon industries. Efforts have been made to increase R&D investment, promote the transformation of scientific and technological achievements, facilitate technology exchange and cooperation, and support the supply and application of low-carbon technologies in new energy, energy conservation, and environmental protection. Strict environmental protection and carbon emission standards have been established and implemented, strengthening regulation on high-carbon emission industries and regulating the development of low-carbon industries to ensure the effective implementation of the dual-carbon strategy. In 2022, China's energy consumption per unit of GDP decreased by 0.1 percent year on year, while carbon intensity decreased by 0.8 percent. Non-fossil energy accounted for 36.2 percent of the country's total power generation.

The supply-side reform is a long-term task that will continue to provide ongoing momentum for China's high-quality development.