A self-driving car on a designated suburban expressway demonstrating technology for taxis and personal conveyances of the future Photo: TUCHONG 

Innovation is pivotal to the real economy, while the real economy is the subject of innovative development. During his inspection tour to northeast China’s Heilongjiang Province in September 2023, General Secretary of the Communist Party of China (CPC) Central Committee Xi Jinping urged efforts to cultivate strategic emerging industries, such as new energy, new materials, advanced manufacturing, electronic information technology, among others, and industries of the future to accelerate the formation of new productive forces and foster new drivers of growth. “Resources for sci-tech innovation should be integrated to guide the development of strategic emerging industries and future industries, so as to form new productive forces,” he said. 

In the recently concluded Central Economic Work Conference, Xi also called for the promotion of technological innovation to support the development of a modern industrial system. “We will promote industrial innovation through technological innovation, especially by using ground-breaking and cutting-edge technologies to foster new industries, new models, and new growth drivers, and develop new productive forces.”

In China, science and technology were initially designated as primary productive forces, and then as advanced productive forces. The new initiative of fostering new productive forces reflects the leadership’s deeper understanding of the laws governing the development of productive forces, and points a new direction for innovative development of the real economy in the new development stage. 

Connotations

Scholars have reached three consensuses on the deeper connotations of China’s new productive forces: innovation-driven development is the nucleus of new productive forces; new productive forces involve comprehensive innovation in laborers, means of production, and objects of labor; and new productive forces require the enhancement of new development impetus by breaking new ground in strategic emerging industries and future industries. 

New productive forces differ essentially from current productive forces in the following three ways. First, new productive forces fundamentally change how productive forces are driven. New productive forces are formed out of the innovation of productive factors, generation of new production processes, and creation of new output based on traditional factor input with innovation as the core driver. In human history it is generally proven that major sci-tech breakthroughs will lead to qualitative leaps in productive forces. The assertion that science and technology are the primary productive forces also indicates the significant role of science and technology in productivity. 

Compared with current productive forces, new productive forces are powered by innovation across the board and in all areas, instead of being limited to innovation only in technology and key fields. On the basis of technological innovation, new productive forces, led by industrial innovation, entail innovation in factors, business models, finance, and other areas. 

The innovation subject also evolves from key subjects to all subjects. To be more specific, not only are subjects of technological innovation involved, such as enterprises, research institutes, and institutions of higher learning, but brick-and-mortar enterprises, sci-tech firms, platform companies, intermediaries, ordinary entrepreneurs, and financial institutions are also participants. 

In terms of innovation structure, new productive forces imply the transition from innovation chains to an innovation ecosystem which integrates innovation, industrial, capital, and talent chains. 

Second, new productive forces revolutionize the way productive forces, which consist of laborers, objects of labor, and means of production, work. In new productive forces, knowledge-based, versatile laborers will replace manual, skill-based workers; objects of labor will shift from merely material objects to a wider range including virtual objects like big data; and the means of production will evolve from physical capital to knowledge and human capital. 

Centering around the digital economy, new productive forces also reflect many new laws of multiple aspects and areas, such as the laws of marginal returns and marginal costs concerning data factor input, revolutionary technological theorems represented by the Moore’s Law, Gilder’s Law, and Metcalfe’s Law, as well as disruptive evolutions. 

Moreover, the new round of sci-tech revolution—typified by digital, network, and intelligent orientations—has given rise to such trends as digital industrialization and industrial digitalization. Meanwhile, the rapid emergence of new industries, new business forms, and new models have introduced a great many new areas and lanes for the development of new productive forces. 

Third, new productive forces radically alter manifestations of productive forces, including factor, product, and scenario application virtualization, and intelligentization. Factor virtualization means that apart from traditional productive forces like labor, capital, and land, data factors have quickly become essential to new productive forces represented by the digital economy. When it comes to product virtualization, virtual products featuring the virtualization of form, function, and usage, including disk, software, recharge, design, game, and service products, have sprung up. The virtualization of scenario application is embodied by the massive creation of emerging virtual application scenarios such as virtual data centers, cloud computing, virtual development environments, virtual communities, augmented and virtual reality, as well as the metaverse. 

The intelligence orientation is mainly seen in the mode of production and products. Within modes of production, traditional mechanization and automation are being superseded by a physical information integration system network connected by wired and wireless means and encompassing all manufacturers’ production links like production equipment, client demand, storage and logistics, and production management to actualize the dynamic monitoring, human-machine interaction, and smart adjustment of production in the manufacturing industry. Accordingly, the production venues also switch from being highly concentrated for scale production purposes to a combination of scattered and concentrated approaches bolstered by digital communication, transmission, and network systems.

Significance to real economy 

The core of new productive forces is innovation, and these forces are carried by industries. Accelerating the formation of new productive forces and construction of industrial carriers is, at present, the main task of the real economy. This new task has clarified the direction for the real economy while also raising new requirements. 

First, the goal of economic development has shifted from catching up with developed economies to taking the lead globally, a result from the combined effect of China’s growing industrial base, strategic environment, and forms of productive forces. China has generally started the transition from the later stage of industrialization to post-industrialization, after years of relentless effort. The conditions for the real economy’s industrial development have substantively improved on all fronts, laying a solid foundation for the shift in China’s economic development goal. 

Second, the development model has switched from an emphasis on cost to coordination between quality, efficiency, and security. For many years, quantity and scale were underscored in China’s real economy, with great focus on the principle of cost saving. This has significantly consolidated the material foundation for Chinese modernization. After accomplishing this, the real economy’s new focus (on the coordination among quality, efficiency, and security) will provide an effective mechanism to realize beneficial interactions between high-quality development and high-level security, thereby promoting high-level security through high-quality development and ensuring high-quality development through high-level security. 

Third, approaches to innovation have evolved from imitation and learning to independent innovation, from technological research and development to industrial innovation, as China’s overall sci-tech strength, including technological resources, input, and output, has fundamentally improved. Based on sci-tech research and development, the translation of technological outcomes into economic benefits have fueled the rise of various emerging fields like new energy vehicles, smart driving, and drones. 

New requirements

The goal to foster new productive forces has put forward three new requirements for the real economy. 

First, innovation must play the dominant role in industrial development. One of the salient features of new productive forces is that innovation drives the development of productive forces. Following this basic law, the core of industrial development must shift from traditional manufacturing and production to innovation, in order to comply with new rules and requirements of new productive forces through technological research and development, and through innovation in application scenarios, business models, managerial methods and means, and organizational structures and models. The aim is to create the industrial vehicles needed for the formation of new productive forces and quickly transform the development of new productive forces into economic benefits to generate new drivers for economic growth.

Second, we need to stimulate and guide demand upgrade through the development of productive forces, which is an important rule for new productive forces. Conforming to this basic rule, the real economy should realize innovation in products, services, consumption scenarios, consumption models, and ways of spending. Through demand creation and the precise matching of demand, rather than the traditional model of satisfying demand, we can forge an effective mechanism for the alignment between supply and demand, to ensure synergy between the deepening of supply-side structural reform and the expansion of effective demand, thus exerting China’s advantages of a super-large market and strong production capacities. 

Third, attention should be paid to boosting the transformation and upgrade of traditional sectors by playing the exemplary role of new productive forces, through the correlation of input and output between industries, industrial ecosystem association, and other approaches. Development experiences of strategic emerging industries and future industries—such as artificial intelligence, new energy, new materials, advanced manufacturing, and electronic information technology—should be replicated in traditional industries like general processing, mechanical manufacturing, and energy and chemical engineering to advance their transformation and upgrade in innovative, efficient, and green directions. 

Constructing industrial vehicles

The formation of new productive forces is driven by technological innovation, with new technologies like digital technologies, artificial intelligence, new materials, and new energy at the heart. This results inevitably from the rapid development of emerging industries such as computing power, artificial intelligence, biomanufacturing, commercial aerospace, low-altitude economy, quantum technology, and life science. 

At the same time, to develop new productive forces is a proactive strategic move for China to deeply grasp the objective law of the new round of sci-tech revolution, and actively respond to the domestic transition to a new development stage as well as the increasingly complex, grim, and uncertain external environment, including the profound restructuring of the global production system. 

New productive forces bring tasks to both development and reform. To construct industrial vehicles for new productive forces, efforts can be made to realize major technological breakthroughs, accelerate the building of new markets, unleash enterprises’ vigor for innovation, spur innovation in government guidance and regulation, and push ahead with high-standard opening up.  

Gao Yu is a professor from the School of Economics and Management at Northwest University. 

Edited by CHEN MIRONG