(Xinhua) State-of-the-art, intelligent, connected vehicles, bleeding-edge quantum computers and futuristic industrial robots — these are some examples of where China aspires to seek new sources of growth amid economic challenges.
Developing new productive forces, a recent catchphrase in China’s policy-making, is among the priorities for this year’s economic work mapped out by a tone-setting conference held last December.

By underscoring this concept, China aims to foster advanced productivity through revolutionary technology breakthroughs, innovative allocation of production factors and deepened industrial upgrading.

With the rapid development of strategic emerging industries and future industries such as new energy and quantum technology, along with traditional industries becoming smarter and more innovative, China’s economic landscape is shifting.
“China has immeasurable potential and strong competitive edges in developing new productive forces, which could become a new growth pole of the Chinese economy in the near future,” said Ming Ming, chief economist at CITIC Securities.

CHASING NEW GROWTH
High-tech industries have become a focus of local governments’ efforts to bolster the economy as authorities eye new growth engines amid domestic and external uncertainties.

In early January, east China’s Hefei city launched its first group of major projects for this year, with over 80 per cent of the total 36.7 billion-yuan (about 5.2 billion U.S. dollars) industrial investment going to new energy vehicles (NEVs), new-generation information technology and photovoltaic sectors.

In central China’s Henan Province, contracts worth nearly 600 billion yuan were signed at the start of the year for projects in advanced manufacturing and strategic emerging industries. In Xiamen city of east China’s Fujian Province, new energy, new materials and biomedicine projects were among the 53 billion-yuan industrial projects launched for the new year.

Yuhan Zhang, a political economist at the University of California, Berkeley, wrote in an article in the Financial Times that the local investment projects launched at the start of 2024 have a distinctly scientific flavour, focusing on new-generation information technology, biopharmaceuticals, artificial intelligence and low-carbon energies.

“This suggests an ambition to ascend the value chain and develop new growth engines,” Zhang wrote.
Developing new productive forces has become the theme of economic development in 2024 for many local governments, which put sci-tech innovation high on their agenda during the local “two sessions”, said Zhao Gang, an analyst at the Beijing-based consultancy firm CIO Manage.

Shanghai has announced it will accelerate its bid to become an international centre of sci-tech innovation this year. Liaoning Province will support the development of new materials, aerospace, low-altitude economy and robotics industry. Beijing plans to advance major integrated circuit projects and high-end medical equipment development, as well as other tech-intensive industries.

BROAD PROSPECTS
Nationwide, China has demonstrated “strong momentum and broad prospects” in the development of new productive forces, the backbone of which are strategic emerging industries and future industries, said Cai Wei, chief strategy officer of KPMG China Advisory.

The share of strategic emerging industries, such as new energy, high-end equipment and biotechnology, in China’s gross domestic product (GDP) rose to over 13 per cent in 2022 from 7.6 per cent in 2014, Cai said, citing official data. China plans to raise that ratio to over 17 per cent by 2025.

Cai believes new productive forces are likely to see larger-scale expansion and innovation in the coming few years, noting particularly strong performance from the new energy, information technology and biological industries.
China has revved up financing and improved the business environment to spur sci-tech innovation, which is key to the cultivation of new productive forces.

China ranked 12th place in the 2023 Global Innovation Index, and became the country with the largest number of top 100 sci-tech innovation clusters in the world for the first time, according to the latest ranking by the World Intellectual Property Organization.

The country saw 3.33 trillion yuan poured into research and development (R&D) in 2023, accounting for 2.64 per cent of the GDP, up from 1.91 per cent in 2012. Fixed-asset investment in high-tech industries last year recorded double-digit growth, well above the total investment growth.

In the January-August period of 2023, more than 90 per cent of the 243 newly-listed firms on China’s A-share market were engaged in strategic emerging industries, mainly new-generation information technology, high-end equipment manufacturing and new materials, according to KPMG research.

The country is also beefing up support for future industries integrated with advanced technology such as metaverse, brain-computer interface and quantum information.

A batch of incubators and pilot zones for future industries would be built by 2025, while breakthroughs would be achieved in about a hundred core technologies in key fields, according to a recent guideline released by the Ministry of Industry and Information Technology and six other ministries and agencies.

Traditional industries are being upgraded for smarter manufacturing at a fast pace. China has built 62 “lighthouse factories”, accounting for 40 per cent of the global total of such factories selected by the World Economic Forum as representing the highest level of global intelligent manufacturing.

LARGE TALENT POOL
The expanding new growth momentum derives from China’s strengthening of human capital and its increasing status in the global value chain, said Cai.
The number of full-time equivalent R&D personnel in China nearly doubled from 3.247 million in 2012 to 6.354 million in 2022 to rank the first in the world, according to the Ministry of Science and Technology.

The international academic influence of China’s top sci-tech talent has continued to grow. The number of Chinese scientists added to the global list of highly cited researchers increased from 111 in 2014 to 1,169 in 2022, ranking second globally.
“Sci-tech innovation ultimately depend on talent, and China’s increasing quantity and quality of sci-tech talent will provide strong support for fostering new growth engines,” said Yuan Lei, deputy chief of the Institute of Economics of Chinese Academy of Social Sciences.

The advancement of new productive forces signifies that China has made positive progress in replacing its old growth drivers with new ones, laying solid foundation for sustained and healthy development of the economy, said Cai.
The dynamism of the new sectors is attracting an influx of foreign investments. In 2023, high-tech industries drew foreign direct investment worth 423.34 billion yuan, accounting for a record-high 37.3 per cent of the total, data from the Ministry of Commerce show.

In just two and a half years, Volkswagen Group has built a hub of intelligent connected vehicles in Hefei of Anhui Province, covering the complete value chain from R&D to manufacturing, sales and services, with total investment exceeding 30 billion yuan.

“We are specifically utilising new technologies and the outstanding infrastructure of Anhui,” said Erwin Gabardi, CEO of Volkswagen Anhui. “We will also benefit from this innovative strength.”

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China praised for efforts to ensure food security
CHINA’S increased grain output and stable food prices in recent years, a result of the country’s policy arrangements and decadelong preparations, stand out brightly against the bleak scenario of rising hunger and malnutrition worldwide, experts said.

“China must have done something very right,” said Kevin Chen, a senior research fellow at the International Food Policy Research Institute, based in Washington, DC, the United States, when asked to comment on recent Chinese data showing a bumper harvest despite adverse factors.

He said that the country’s adoption of technologies and flexible use of policy tools have incentivised food production and helped to build a food supply system that is resilient to the turmoil unfolding in the global food supply system.
China’s overall grain output was a record 695 million metric tons last year, a year-on-year increase of about 1 per cent, despite heavy rains, floods and droughts in some regions across the country, according to the Ministry of Agriculture and Rural Affairs.

To ensure absolute security, food supply was listed as one of the two redline requirements for rural-related work by the central authorities in the annual No 1 Central Document, which was released on Saturday.
The document is the first policy statement released each year by the Communist Party of China Central Committee and the State Council.

An indicator of government priorities, the document said that this year’s focus will be on improving farmland productivity while keeping the growing area stable.

Chen Bangxun, head of the ministry’s development and planning division, said at a news conference last month that the country’s per capita grain stockpiles stood at more than 490 kilograms, far exceeding the international food security benchmark of 400 kg.

The country’s food inventory-to-consumption ratio was also far higher than the safety level of 17 to 18 per cent set by the United Nations Food and Agriculture Organisation, he said.

However, a range of global factors, including extreme weather events, increasing protectionism, regional conflicts and a drought-induced export ban by India, pushed rice prices to a 15-year high.
In contrast, China’s food prices remained stable in 2023, with the domestic rice procurement price in September just 0.7 per cent higher than in January.

Johan Swinnen, Director-General of the International Food Policy Research Institute, said the world had witnessed an undoing of improvements in food supply since 2015.

“If you look at, for example, the period from 1985 to 2015, there have been very significant improvements in the world in terms of hunger and malnutrition. And so, food security improved, and poverty went down,” he said.
Then, around 2015, “everything stopped and now it’s going the other way around”. “That is really very, very worrying,” he said.

Swinnen said that climate change was part of the reason. But regional conflicts played a disproportionate role in fueling homelessness and hunger.
“Before 2015, for almost 20 years, there were about 40 million people in the world who had to leave their homes. That’s a lot of people. But that has gone up within seven years or so to 100 million,” Swinnen said.

He praised China’s recent efforts to wean itself off reliance on food imports by boosting domestic production, and said that an international food price hike around 2008 had served as a wake-up call for countries that used to be comfortable being dependent on food produced overseas.

“The price hike triggered a lot of concern in many countries,” he said. “In China, it really woke up the government. There is no guarantee that we’re going to have food at low prices all the time.”
Officials said last month that China’s grain imports rose 11.7 per cent year-on-year in 2023.

According to the General Administration of Customs, soybeans accounted for more than 60 per cent of grain imports last year, and officials said that a major factor was animal feed producers’ high demand for soybean meal, a byproduct of soybean oil extraction.

Agricultural authorities said they are working to revamp animal feed formulas to use the protein-rich raw material more efficiently.
China has long relied on imported soybeans in order to create more growing areas for wheat and rice and to ensure the absolute security of staple food provisions.

More recently, the central authorities have worked to bolster domestic soybean supply to shield the country, which is the world’s largest food importer by volume, from external factors ranging from trade protectionism to logistics woes caused by regional conflicts.

Deng Xiaogang, vice-minister of agriculture and rural affairs, said recently that the planting area for soybeans reached 10.4 million hectares last year, with a record yield of 20.84 million tons.

Kevin Chen from the International Food Policy Research Institute said that China’s strategy of increased dependence on soybean imports to make way for staple food production had worked quite well in recent decades, and the adoption of a technology-driven approach to bolster self-sufficiency in recent years will provide a boon not only for the country but also for the entire world.
“China is so big. If we want to have global food security, we want to make sure China’s food is secure,” he said.

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Beijing, Washington in talks to stabilize economic ties
THE latest meeting in Beijing between high-ranking Chinese and United States officials indicated that the two countries are continuing joint efforts to stabilise bilateral economic and trade ties through a pragmatic approach and candid communication, experts said on Tuesday.

This has sent positive signals to market watchers, said the experts, who also expected the two countries to deepen cooperation in areas including macroeconomic policy coordination and multilateral governance, in order to benefit world economic growth.

Their remarks came as China and the US convened the third meeting of the China-US economic working group in Beijing on Monday and Tuesday, marking a significant step in ongoing efforts to address economic concerns and foster constructive dialogue between the two nations.

At the same time, Vice-Premier He Lifeng, who is China’s lead person for China-US economic and trade affairs, met on Tuesday with a delegation led by Jay Shambaugh, undersecretary for international affairs at the US Department of the Treasury, who was in Beijing for the meeting of the economic working group.

During the meeting, the vice-premier emphasized the need for both sides to leverage the channels provided by the China-US economic working group to deepen exchanges, build consensus and foster stable economic relations, with the goal of ensuring mutual benefits for the businesses and people of both nations.

“The meeting and the smooth running of the China-US economic working group mechanism established last year showed that the two countries have both realised the importance of maintaining communication and deepening co-operation,” said Lu Feng, a professor of economics at Peking University’s National School of Development.

“Both sides have expressed their concerns while seeking co-operation and improvement to bilateral economic and trade relations during recent talks, which at least will reduce misunderstanding or wrongful judgment,” Lu said.
Cui Fan, a professor at the University of International Business and Economics in Beijing, said that better Sino-US trade and economic relations will be beneficial for both countries as well as the world.

The two countries are expected to strengthen communication to better deal with challenges and pressures facing the whole world, such as climate change and the debt risk of some developing countries, Cui said. The two countries can also work together more on taxation in the digital economy under the framework of the G20, Cui added.

Lu said the academic community hopes that the world’s two largest economies will strengthen communication on economic situations and expand co-operation on macroeconomic policy co-ordination, in order to bring more positive factors to the global economy.

In addition, he said he believes that the two countries can work more closely together on multilateral governance in areas such as climate change response, debt issues of some developing countries and multilateral financial institutions.
Furthermore, China is capable of playing a bigger role in international financial institutions, Lu added.