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Taking a peek at the future of the Chinese economy

First Voice

 , Updated 15:55, 07-Mar-2024

Editor's note: From old to new. How will the Chinese economy transform itself? Take a look at this episode of First Voice and see how the new productive forces – a concept that perplexed the Western media – will help China do it.

New quality productive forces. That's the phrase you need to know if you want to understand this year's Two Sessions and the future of the Chinese economy. Chinese President Xi Jinping first proposed the concept during an inspection and research trip to Northeast China last year: "With innovation leading, new quality productive forces mean advanced productivity freed from traditional economic growth models. It features high technology, high efficiency, and high quality and aligns with the country’s new development philosophy."

It's a transformation from old to new by tapping into innovation and technology. The old model, as we've all known the problems about, has lost its steam. Zhu Min, Vice Chairman of the China Center for International Economic Exchanges, said that "the Chinese economy, previously was driven more by three key drives. One is infrastructure investments, which always accounted for more than 50 percent of the GDP; the second is real estates, and it really grew strongly; And the third is export. Now those three things are all gone."

Martin Jacques, former senior fellow at the Department of Politics and International Studies of Cambridge University, said that "China therefore is embarking now on a different kind of growth. The period of high-speed growth is being replaced by high-quality growth. The green growth, carbon-free growth, integrating the real economy with the digital economy. These are now the key targets."

The critical question is, could China be innovative enough for high tech, high efficiency and high quality to fill this role as a growth engine? Optimistic, with a little bit of caution. The optimism comes from China's continuous focus on the innovation and integration of high-tech into its economic ecosystem. Since 2012, China has risen in the Global Innovation Index, from ranking 34th in 2012 to 12th in 2023. In 2023, for the first time, China overtook the United States with the most Science & Technology clusters. China's R&D expenses tripled from 1.03 trillion yuan in 2012 to 3.09 trillion yuan in 2022. Making China the second highest spending in R&D in the world. China's R&D personnel, number of high-tech companies and high-tech zones have all grown significantly.

Executive Chairman of the Mahon China Investment Management David Mahon said in an interview that "what interests me is about the Chinese economy is that we are beginning to see, as in the electric vehicle sector, global competitive companies like BYD." "So I think we'll begin to see the emerging of these new global brands around new technology. And we're already seeing it in the vehicle sector. So it's almost like the torch ahead of us," he said.

Today, China leads the world in the electric vehicle market, accounting for nearly 60 percent of global sales. Chinese car manufacturer BYD has surpassed Tesla as the number one seller of EVs. In China's Yangshan Port, something of a futuristic scene is on display day in and day out. Facilitated by 5G communication technology, the port has six bridge cranes that can achieve remote control and carry out remote pick-up from 100km away. It reduces the need for personnel at the fourth phase of the port by 70 percent compared with traditional terminals of the same scale. Smart technology and artificial intelligence have been applied to the entire industrial chain in China.

Andy Mok, senior research fellow at the Center for China and Globalization, said that "anything that needs to be manufactured, that includes any sort of tangible product, will certainly not only benefit, but transformed by smart manufacturing." "This can span industries from consumer goods like Haier, heavy manufacturing like SANY, of course, companies like Huawei. And even foreign companies like Siemens operating in China are getting on this smart's manufacturing trend," he said.

I could go on and on with examples, but we can't talk honestly about this without talking about some of the challenges. The "new quality productive forces" is a new concept. By which it means, China is still at an early stage, figuring out the specifics of this transformation. And since it is innovation and tech driven, we can't get around the elephant in the room: Time. "You need new sorts of people that are very very highly skilled at working with these machines, supporting them, maintaining them. Of course, that means education, it means re-training," said Mok.

It's a matter of pace: Will tech become the new growth engine and the workforce adapted to the new reality? Or will the workforce be hollowed out by these new ways of production? 

It's not a unique China problem. According to McKinsey & Company's report, in the United States, activities that account for up to 30 percent of hours currently worked could be automated by 2030. 22 percent of U.S. workers are saying that they worry about their jobs being replaced by technology. LinkedIn's survey in Europe found that more than one-third of the respondents feel overwhelmed by AI and worry they won't be able to keep with the developments in their workplaces.

The reality is that a wave of tech and innovation-led transformation is coming, or have already come really, in China and across the world. How each country chooses to deal with it will be up to each government. That's the thing I'd suggest to watch during this year's Two Sessions. To achieve high-quality development, to create these new quality productive forces, require serious long-term planning that balances the need for growth and the pace at which society can change. Fortunately for China, we do plan things in the long-terms, especially at this time of the year.

(If you want to contribute and have specific expertise, please contact us at opinions@cgtn.com. Follow @thouse_opinions on Twitter to discover the latest commentaries in the CGTN Opinion Section.)

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