Innovation the powerhouse of China's economy

China Plus Published: 2019-09-17 22:51:56
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Note: The following article is taken from the Chinese-language "Commentaries on International Affairs."

China's economy is transitioning to a 'new normal' of slower but more balanced and sustainable growth, while the ‘new economy’ is rapidly rising with enhanced capabilities for innovation. That’s the key finding of a new report jointly released by the World Bank and the Development Research Center of the State Council and the Ministry of Finance. According to the report, since the global financial crisis, the slowdown in total factor productivity (TFP, efficiency of production activities over a certain period of time) has been common in both developed and developing countries, and China is no exception. In recent years, China's total factor productivity has rebounded, but the overall level is still low.

[Photo: VCG]

[Photo: VCG]

The good news is that China's economy is benefitting from constantly emerging new kinetic forces. According to the latest data released by the National Bureau of Statistics, the new kinetic energy index for China's economic development in 2018 reached 270.3, a year-on-year increase of 28.7%. Among them, the rate of the network economy contributing to the total index growth is over 80%. This shows that the digital economy, encompassed by the network economy, continues to exert strength in China.

The report further says China's ranking on the “Global Innovation Index” and other rankings has steadily increased, from 29th in 2011 to 17th in 2018, and is currently ranked highest among developing countries. In the fields of e-commerce, artificial intelligence, financial technology, high-speed rail, renewable energy, electric vehicles and others, China stands out, and is entering the world's leading camp.

At the same time, another sign of the Chinese economy's accumulation of new kinetic energy is the continuous increase in human capital. According to the report, graduates in science, technology, engineering, and mathematics account for 40% of all undergraduate students in China. China is becoming a research base for global technology companies including Microsoft and IBM.

The new kinetic energy of China's economy continues to gather pace, mainly because of the Chinese government’s emphasis on using innovation to lead development, and has fully mobilized market forces, and launched a series of policies to support enterprise and talent innovation, and encourage enterprises to increase research and development. At present, the R&D spending of Chinese enterprises accounts for more than 70% of the total societal R&D spending. Alibaba, Huawei, Tencent and other companies have stood at the forefront of global technological innovation.

At present, China's total factor productivity (TFP) is only about half of that of the OECD (Organisation for Economic Co-operation and Development) countries, which means that China still has great potential to promote future growth by increasing the TFP.

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LU Xiankun Professor LU Xiankun is Managing Director of LEDECO Geneva and Associate Partner of IDEAS Centre Geneva. He is Emeritus Professor of China Institute for WTO Studies of the University of International Business and Economics (UIBE) and Wuhan University (WHU) of China and visiting professor or senior research fellow of some other universities and think tanks in China and Europe. He also sits in management of some international business associations and companies, including as Senior Vice President of Shenzhen UEB Technology LTD., a leading e-commerce company of China. Previously, Mr. LU was senior official of Chinese Ministry of Commerce and senior diplomat posted in Europe, including in Geneva as Counsellor and Head of Division of the Permanent Mission of China to the WTO and in Brussels as Commercial Secretary of the Permanent Mission of China to the EU. Benjamin Cavender Benjamin Cavender is a Shanghai based consultant with more than 11 years of experience helping companies understand consumer behavior and develop go to market strategies for China. He is a frequent speaker on economic and consumer trends in China and is often featured on CNBC, Bloomberg, and Channel News Asia. Sara Hsu Sara Hsu is an associate professor from the State University of New York at New Paltz. She is a regular commentator on Chinese economy. Xu Qinduo Xu Qinduo is CRI's former chief correspondent to Washington DC, the United States. He works as the producer, host and commentator for TODAY, a flagship talk show on current affairs. Mr. Xu contributes regularly to English-language newspapers including Shenzhen Daily and Global Times as well as Chinese-language radio and TV services. Lin Shaowen A radio person, Mr. Lin Shaowen is strongly interested in international relations and Chinese politics. As China is quite often misunderstood in the rest of the world, he feels the need to better present the true picture of the country, the policies and meanings. So he talks a lot and is often seen debating. Then friends find a critical Lin Shaowen criticizing and criticized. George N. Tzogopoulos Dr George N. Tzogopoulos is an expert in media and politics/international relations as well as Chinese affairs. He is Senior Research Fellow at the Centre International de Européenne (CIFE) and Visiting Lecturer at the European Institute affiliated with it and is teaching international relations at the Department of Law of the Democritus University of Thrace. George is the author of two books: US Foreign Policy in the European Media: Framing the Rise and Fall of Neoconservatism (IB TAURIS) and The Greek Crisis in the Media: Stereotyping in the International Press (Ashgate) as well as the founder of, an institutional partner of CRI Greek. David Morris David Morris is the Pacific Islands Trade and Investment Commissioner in China, a former Australian diplomat and senior political adviser. Harvey Dzodin After a distinguished career in the US government and American media Dr. Harvey Dzodin is now a Beijing-based freelance columnist for several media outlets. While living in Beijing, he has published over 200 columns with an emphasis on arts, culture and the Belt & Road initiative. He is also a sought-after speaker and advisor in China and abroad. He currently serves as Nonresident Research Fellow of the think tank Center for China and Globalization and Senior Advisor of Tsinghua University National Image Research Center specializing in city branding. Dr. Dzodin was a political appointee of President Jimmy Carter and served as lawyer to a presidential commission. Upon the nomination of the White House and the US State Department he served at the United Nations Office in Vienna, Austria. He was Director and Vice President of the ABC Television in New York for more than two decades.