After World War II, a number of Asian and African countries that were originally colonies or semi-colonies of Western powers became independent. Because they were underdeveloped, their per capita gross domestic product (GDP) and per capita income were low. After gaining independence, they desired to accelerate development and shake off poverty.

Then they made efforts to attract investment and open their harbors in the hope of changing the situation by offering cheap resources to the outside. In a short time, their economies grew rapidly, but most of them later  fell into the low-income trap or middle-income trap. It shows that blind pursuit of growth without methods suitable to local realities will not produce real prosperity.

Although their GDP increased through extracting resources and exports, they still relied heavily on Western transnational corporations. Without radical reforms in social and economic systems as well as transformations of development modes, developing countries found it difficult to escape these traps.

China should learn lessons from these countries and realize the drawbacks of quantitative development: excessive consumption of resources, severe damage to the environment, excess production capacity in some industries, low efficiency and missing the perfect chance for restructuring and technological innovation. It is sure that quantitative development, which can bring about a period of rapid or ultra-rapid growth, will not be sustainable, while it will have lasting negative consequences.

Currently, China’s economic development has entered the new normal stage while moving toward a high-level pattern with a more complex division of labor and rational structure. Under the new normal, we should change from quantitative development to qualitative development. This is not only a reform in system but in concept of national conditions. In terms of system, the reform should first alter the resource allocation mode. Resource allocation was formerly dominated by administrative departments. The market should play a decisive role while authorities should provide guidance and supervision. 

In terms of concepts, reform requires an in-depth understanding of the national situation. We should keep in mind that China has a weak economic foundation and a large rural population. Right now, people’s earnings are still not abundant and there are relatively big income gaps in society. Therefore, poverty reduction work should be further advanced.

Also, ecological protection was not given enough attention during the urbanization process, so more efforts should be put into environmental pollution treatment. Moreover, if we put off the reform any longer, the difficulty of realizing the coordinated development of economy and society will increase.

Considering China’s realities, the most important thing now is to change the focus of development from quantity to quality while slowing down growth. In a relative long period of time, it is reasonable to keep a moderately high rate of growth.

Also, we should realize the importance of structural reform, especially supply-side structural reform. It requires not only improvement in the industrial structure but also cutting overcapacity, destocking, deleveraging, reducing costs and identifying growth areas. This will promote the matching between demand and supply and will also boost the enthusiasm and innovation of enterprises.

Professor Li Yining is Dean Emeritus of the Guanghua School of Management at Peking University.