Chinese innovation could push the nation’s growth rate up to 8 percent in the next five to 10 years provided its technology surpasses that of developed countries, according to a new study conducted by Renmin University of China.
 

 

Chinese innovation could push the nation’s growth rate up to 8 percent in the next five to 10 years provided its technology surpasses that of developed countries, according to a new study conducted by Renmin University of China.

The report, titled “Analysis and Forecast of Chinese Macroeconomics,” was released at the China Macroeconomic Forum on Sept. 17 in Beijing.

The analysis looked at macroeconomic indicators in the third quarter of 2016. According to the report: “China’s potential growth rate is able to reach 6.5 to 6.6 percent against the benchmark in the next five years. It is likely to arrive at 6.82 to 6.93 percent in positive conditions and, according to the most optimistic estimates, might attain 8 percent when its technological level is at the world’s cutting edge.”

The report focuses on building new momentum for the Chinese economy amid the slowdown in global technological development and offers advice that should help the nation to sidestep the middle-income trap.

Statistics show that 101 countries were rated by the World Bank as middle-income countries in 1960, but by 2008, only 13 of them had managed to move into the ranks of high-income countries.

After analyzing international experience, the report finds that the transformation of the growth model and momentum is crucial to transitioning from the middle-income to high-income ranks.
Examining the changes in China’s potential growth rates in 1988, 1993, 1998, 2003 and 2011, respectively, Liu Fengliang, a professor from the School of Economics at Renmin University, said that the total factor productivity (TFP) played a decisive role in the fluctuation.

To avoid the middle-income trap, the Chinese economy needs to turn from the simple factor-driven model to the TFP-driven model, Liu said.

Technical innovation is the forerunner of new growth impetus. In 2015, China received more than 1.1 million applications for invention patents, ranking first in the world for five years consecutively.

The country’s research and development costs have also reached 1.4 trillion yuan ($210 billion). According to the Organization for Economic Cooperation and Development, China will spend more on research and development than the United States in 2018.

“Some time in the future, major cutting-edge technologies will be concentrated in the fields of information and communication, in which China has reached or approached the world’s frontier,” Liu said, adding that the status quo has laid the groundwork for future independent technical innovation.

The sophistication and intelligentization of manufacturing is an important source of new momentum. Attending scholars generally agreed that China has yet to finish the lower stage of industrialization. Instead, some argued that it is in a critical transition from low-end industry to middle- and high-end development.

“China needs to advance industrialization in depth and breadth,” said Jin Bei, former director of the Institute of Industrial Economics at the Chinese Academy of Social Sciences (CASS) and CASS Member.

China not only has vast development space, but with the implementation of the “Belt and Road” initiative, it can better connect to global industrialization to seek greater room for growth, Jin said.

Liu Shijin, deputy chairman of the China Development Research Foundation, said that as supply-side structural reform progresses, the Chinese economy will likely enter a moderately rapid, more creative and sustainable stage in the next one or two years. Based on global experience, the stage will last for five to 10 years, and even longer, laying a solid foundation for building a comprehensively prosperous society by 2020 as well as longer-term goals, he said.  

 

Mao Li is a reporter at the Chinese Social Sciences Today.