The essence of NQPF should be to empower existing industries and generate new products. Photo: TUCHONG

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The “New Quality Productive Forces (hereinafter referred to as NQPF)” is an important concept proposed by General Secretary Xi Jinping amidst unprecedented global changes over the past century. Discussions concerning NQPF should not be limited to strategic emerging industries and future industries such as new energy, new materials, advanced manufacturing, and electronic information. Instead, it should start from the underlying logic of innovative development, focusing on how emerging technologies and industries create and develop productivity, thereby promoting the stable growth and transformative development of the Chinese economy. Cultivating NQPF requires a profound contextual understanding of China’s dual economic transition, a comprehensive recognition of the fundamental relationship between frontier technologies and existing industries with innovative development. Moreover, it demands a transformation in both development and economic policy philosophies.

China’s dual economic transition

The introduction of the concept of NQPF significantly underscores the primary context of China’s ongoing economic transitions. The first transition involves the transformation of the domestic economic development model, specifically towards high-quality development, a shift resolutely initiated by China from the 18th CPC National Congress onward. Over more than seven decades, China has established the world’s largest and most comprehensive industrial system. However, as the economic development level improves and domestic and international environments change, China must depart from its traditional reliance on factor-driven economic growth. Instead, it must transition towards innovation-driven economic growth, leveraging the market’s decisive role in resource allocation to construct a high-quality development “engine.” 

The second transition entails transforming international political and economic relations. Amidst intense strategic competition among major powers, China is facing both the “decoupling” and “de-risking” strategies of Western countries, and must therefore urgently break free from the cycle of long-term dependence on foreign technology and markets, along with the dilemma of industry and innovation cooperation. This requires China to develop and strengthen its self-reliance in science and technology, promote internal circulation, and promote mutual promotion between domestic and international circulations to collaboratively build a new development pattern, ensuring that China’s development stands on a more secure and reliable foundation.

The backdrop of the dual transition determines that NQPF are becoming the “drive shaft” propelling the profound transformation of China’s economy. This cannot be achieved solely by emphasizing sectoral policies that focus on technological breakthroughs and new technologies or industries. Developing NQPF requires activating extensive resources such as existing technologies and industries domestically, stimulating innovative dynamics with self-evolving and self-iterating capabilities, thereby enhancing China’s new momentum for high-quality development and shaping a new pattern of comprehensive openness.

Serving multiple industries

The core essence of NQPF is to blend new technologies and industries with existing ones, empowering the latter to transform and upgrade, and produce new products or services. This process effectively guides the development of a modern industrial system. It’s not just a vital method for leveraging cutting-edge technologies to drive productivity and economic value but also a crucial support for advancing the development of cutting-edge technology innovation.

The Central Economic Work Conference in 2023 proposed that China will adhere to the principle of stability while advancing, promoting stability through progress, establishing first and then breaking through, with a focus on leveraging technological innovation to lead the construction of a modern industrial system. This provides clear guidance for the practical implementation of NQPF. In the process of economic transformation, continuity and inheritance exist between old and new driving forces, which should not be viewed as static or mutually exclusive. Traditional industries have always been a significant component of the national economy. Even in organizations such as the OECD, the narrow definition of “high-tech industries” (industries with R&D intensity of over 5%) accounted for only about 3% of total economic output in the early 21st century, and when important sectors such as automobile manufacturing are included in the “medium-high-tech industries,” its proportion is still only 8%-9%. This structure not only reflects the balance between new and old driving forces in economic activities but also reveals the enormous potential and significance of developing NQPF based on existing industries to achieve their transformation. 

For new technologies and industries to achieve full development, they must serve the broader existing technological and industrial landscape. Whether it is the widely praised “Four New Great Inventions” from recent years (high-speed rail, e-commerce platforms, mobile payments, and shared bicycles) or the rapidly developing new energy vehicles of today, they all serve as excellent examples of how new technologies can activate existing industries.

Relying on existing industries to develop NQPF is a necessary condition for deeper long-term development of technological innovation. On one hand, continuous progress in cutting-edge technology must rely on long-term innovation investment within existing industries. Technological innovation in any field is a long and cumulative process, and it is difficult to reach maturity solely through policy funds or venture capital support. This requires finding industries to support technological innovation, sharing the related expenses through large-scale applications within existing industries, and continually obtaining R&D investment to support subsequent development. 

On the other hand, continuous exploration of cutting-edge technology requires existing industries to provide platforms for innovation interaction. While breakthroughs “from 0 to 1” in frontier technology are crucial, industrial innovation competition has never been determined solely by laboratory invention competitions. The deepening development of industrial technological innovation relies on the continuous interaction between innovators, users, and suppliers. This interaction can help innovators grasp existing information and better meet consumer needs. More importantly, innovators can only accelerate technological progress by continuously creating “new problems” and solving them through interaction with users and suppliers. 

In industrial innovation competition, innovation interaction is not carried out based on technical knowledge on paper but on “products” as the basic interface, collaborative goals, and competitive benchmarks. Without specific industry contexts, subsequent innovation risks losing its technological direction and perception of market competitiveness. In the latter stages of innovation, the rate of technological progress largely depends on the scope of interaction between innovators, users, suppliers, and competitors. Serving a wide range of industries such as agriculture, manufacturing, services, and sectors related to people’s livelihoods is inevitably the key path for innovative technologies to iterate and develop.

In fact, understanding the relationship between new technologies, new industries, and existing technologies and industries helps us objectively understand the sources of China’s advantages in the innovation field. China’s current advantages in areas such as solar photovoltaics, mobile internet, artificial intelligence, and new energy vehicles are the result of closely integrating new technologies, new industries, and existing technologies and industries, continuously exploring and solving engineering problems and market competition. From this perspective, China’s strong production capacity and vast market size are inherent advantages for nurturing NQPF. Naturally, the same applies to future innovation trends. Technological innovation in modern complex industries evolves and iterates rapidly, with intertwined and dynamic relationships among technologies, between technology and markets, and between technology and policy regulation. No matter how strong a country or enterprise is in terms of talents, original technology, and capital reserves, without engaging in industrial activities that face a complex interactive environment and involve high investment risks, they will struggle to seize the pulse of industrial innovation and transform their resource advantages into innovation advantages quickly. This phenomenon is particularly evident in frontier fields such as artificial intelligence and satellite communications, where this pattern is likely to repeat itself.

Shift in mindset

Accelerating China’s economic transformation through the development of NQPF requires us to shift our current mindset and embrace market competition as the fundamental starting point in our development and policy frameworks.

Different activities such as technological breakthroughs, industrial innovation competition, and the development of processing and trade have their underlying logic. Pushing technological development through pre-planned technological routes or promoting the development of so-called “high-tech industries” through massive investments regardless of returns, are manifestations of planned thinking and investment-driven thinking in the field of technological innovation. The key characteristic is that innovation goals are not shaped by market competition processes, but rather are predetermined by policy funds or venture capital. 

Indeed, technological development planning, technological breakthroughs, and establishing innovation demonstrations in specific areas are of great value for subsequent technological development and innovation investment. However, the creation and development of productivity must withstand the test of the market to achieve resource efficiency in value creation. Therefore, when scholars discuss economic policy issues related to innovation, they focus not on generalized “technology” but on “useful technology” or reasonable expectations of “useful technology” as the core. “Useful technology” means that the understanding, decomposition, and solution of emerging technological issues should all be accomplished within actual market scenario of interaction among innovators, users, and collaborators during the innovation competition process. Such market mechanisms can truly play an effective role in resource allocation.

Therefore, our focus should not be solely on the development of new industries and new dynamic forces such as new energy, new materials, and advanced manufacturing. The formation and development of NQPF should closely follow widespread competitive industrial activities, and avoid “bonsai-style” new industries created through long-term support of policy funds and financial capital. Nor should we blindly squeeze out “old” industries as a consequence of developing new ones. However, it’s worth noting that early development and diffusion of cutting-edge technological innovations involve high uncertainty, leading to collective action problems among different companies (or institutions). Moreover, the resources necessary for innovation are intricately linked to public sectors such as research, education, labor, finance, and the environment.

Strong support from the national level is essential. However, the existing policy mindset requires profound transformation. Integrating new technologies, new industries, and existing technologies and industries requires a shift in focus towards policy tools on the “application side” rather than solely emphasizing the “research and development side.” This entails increasing incentives for introducing innovation into existing industries and guiding emerging technologies and industries ground their innovation efforts within existing industrial frameworks. 

Furthermore, policies should not be narrowly tailored to specific technologies or enterprises. “Selective” policies themselves imply exclusivity, and goals shaped through continuous interactions among market participants cannot be achieved through pre-policy selection. Relevant policy formulation should focus on supporting the construction of innovation communities through investing in key infrastructure, organizing dialogue platforms, setting medium and long-term technological roadmaps, solving key common technical issues, and other means to establish directional consensus and set innovation agendas, thereby laying a solid basis for accelerating the development of NQPF.

Feng Kaidong is an associate professor from the School of Government at Peking University.

Edited by WENG RONG