Upgrading the Economy and Expanding Output

In the report of the 20th National Congress of the Communist Party of China (CPC) held in October 2022, General Secretary Xi Jinping emphasized the need to advance the rejuvenation of the Chinese nation on all fronts through a Chinese path to modernization and pointed out that to build a modern socialist country, we must, first and foremost, pursue high-quality development. The Central Economic Work Conference held in December 2022 emphasized the need to promote Chinese modernization and work toward a full economic recovery as well as to effectively upgrade China’s economy and appropriately expand its output, in order to set the stage for building a modern socialist country.

I. Drawing confidence in development from socioeconomic achievements

The size of our economy reached new heights.

To offset the impacts of the repeated resurgence and spread of Covid-19, the outbreak of the Ukraine crisis, and other unanticipated factors, we took more decisive action to implement our macro policies. We coordinated our Covid-19 response, worked hard on economic and social development, and stabilized the macroeconomic landscape, and thus our economy has continued to develop despite intense pressures. Our GDP tipped over the 120 trillion yuan mark, reaching 121 trillion yuan, a year-on-year increase of 3%. Employment remained largely stable, with 12.06 million urban jobs added in the past year, exceeding the target of 11 million. Overall stability was maintained in prices, with the consumer price index rising by 2%, far below the levels of other major economies, creating a sharp contrast between global inflation and China’s domestic stability. Our balance of payments remained in good shape, and our foreign exchange reserves remained stable at more than US$3 trillion.

The quality of our development steadily improved.

The role of innovation in guiding development was further strengthened, efforts were accelerated to boost capabilities in nationally strategic areas of science and technology, and a stream of significant scientific and technological advances were made throughout the year. China’s R&D spending exceeded 3 trillion yuan for the first time, accounting for 2.55% of GDP, and China rose to 11th in the Global Innovation Index. Structural adjustments in the fields of industry, investment, consumption, and trade accelerated, and high-tech manufacturing, equipment manufacturing, and modern service industries all performed well. Investment in high-tech industries increased by 18.9%, 13.8 percentage points higher than investment growth as a whole. Consumer spending gradually recovered, with online retail sales of physical goods increasing by 6.2%, thereby ensuring smoother economic flows. The rural revitalization strategy began to be implemented, new urbanization progressed, regional economic structures were optimized further, and development between urban and rural areas and between regions became more coordinated.

Reform and opening up made new progress.

The market system was improved, the Decisions of the Central Committee of the Communist Party of China and the State Council on Accelerating the Construction of a Unified National Market was promulgated and implemented, and continuous improvements were made to the business environment. Reforms in key areas advanced, the layout and structure of the state-owned sector was refined, and an environment conducive to reform and development of private businesses was fostered. Price reforms relating to electricity, coal, and water resources made headway. Remarkable results were achieved in stabilizing foreign trade and investment, new forms and models of foreign trade developed more quickly, and trade and investment were further liberalized and facilitated. New progress was made in high-quality cooperation under the Belt and Road Initiative, and we continued to deepen international cooperation on production capacity and third-party market. By the end of 2022, China had signed more than 200 cooperation documents with 150 countries and 32 international organizations.

Substantial progress was registered in ecological conservation.

Further efforts were made to keep our skies blue, waters clear, and lands clean, and the ecological environment constantly improved. The “1+N” policy framework for reaching peak carbon emissions and carbon neutrality was completed, and steady headway was made in the 10 major initiatives for realizing peak carbon. Upgrades and transformations to conserve energy and reduce carbon emissions in key sectors, industries, products, and equipment were accelerated, and solid progress was made in promoting green, circular, and low-carbon development. China’s total installed capacity of electricity generated from renewable energy surpassed 1,200 gigawatts. China has become a global leader in installed capacity of hydro, wind, solar, and biomass power generation, and is constantly raising its capacity for sustainable development.

People’s standard of living improved.

Tangible results were achieved in keeping employment stable and increasing people’s incomes, and employment was boosted and entrepreneurship encouraged among key groups, such as college graduates, ex-service members, and rural migrant workers. Reform of the income distribution system was deepened, and the personal incomes of both urban and rural residents grew steadily, with per capita disposable income nationwide increasing by 2.9% in real terms. Progress was made with the project to strengthen education and the Healthy China Initiative, and steady improvements were made to public services. Coverage of social security programs was expanded, with participants in basic old-age, unemployment, and workers’ compensation insurance schemes reaching 1.053 billion, 238 million, and 291 million, respectively, by the end of 2022.

Tourists enjoy the night scenery during a raft tour in the Xianshan Gongshui scenic area, located in Xuan’en County, Enshi Tujia and Miao Autonomous Prefecture, Hubei Province, January 28, 2023. With a population of over 1.4 billion and a middle-income group of over 400 million, China is an enormous market with the greatest potential for growth in the world. Total retail sales of consumer products in the country totaled 44 trillion yuan in 2022. XINHUA/ PHOTO BY WANG JUN

Our ability to withstand risks further improved.

Fiscal and financial operations remained stable on the whole, and our ability to ensure food security, energy security, and the security of major industrial and supply chains increased. China experienced its 19th year of consecutive bumper harvests, with total grain output above 650 million metric tons for the 8th consecutive year. Development for energy production, supply, storage, and marketing accelerated, our capacity for securing supplies of coal as our basic energy source improved, and energy supplies remained generally stable during summer and winter consumption peaks. Sound mechanisms for risk identification, early warning, and response regarding key industrial and supply chains were established for ensuring their security.

The past five years have been truly momentous and extraordinary. The Chinese economy has withstood accelerating changes in the global landscape, the impact of the Covid-19 pandemic, downward pressure on the domestic economy, and other tests. Through all of this, Chinese people’s lives and health have been firmly protected, and our economy has continued to grow despite considerable challenges. Over the past five years, China’s economy grew at an average annual rate of more than 5%, significantly higher than the global average rate of 2.3% in the same period. Our position in the world as the second largest economy, the second largest consumer market, the largest manufacturer, the largest trader of goods, the second largest trader of services, and the holder of the largest foreign exchange reserves has been consolidated. The first decade of the new era that began in 2012 has seen China’s economic and social development make historic achievements and undergo historic changes as well as transition into the stage of high-quality development. Under the guidance of Xi Jinping thought on the economy, China’s economic strength has taken a historic leap, and our economic strength, scientific and technological strength, comprehensive national strength, and international influence have all continued to rise. We secured a historic victory by eradicating absolute poverty and attained the goal of building a moderately prosperous society in all respects within the set timeframe, thereby completing the First Centenary Goal. We have now embarked on a new journey toward building a modern socialist country, and China’s development has been elevated to a higher starting point.

Dock workers are seen assisting an overseas cargo ship in berthing at the Dapukou container terminal in the Jintang Port Area of Ningbo-Zhoushan Port, January 31, 2023. Many industries resumed production shortly after the lunar new year, laying a solid foundation for sustained economic growth this year. PHOTO BY XINHUA REPORTER XU YU

II. Promoting strategic confidence in high-quality development

Our economy, however, still faces considerable risks and challenges. Unprecedented global and epochal changes are occurring, and China is seeking and promoting its own development amid a more complex and graver strategic environment. Internationally, momentous change on a scale unseen in a century is accelerating, regional conflicts and disturbances are arising frequently, and global issues are becoming more acute. The world has entered a new period of turbulence and change. Covid-19 continues to disrupt global industrial and supply chains, the spillover effects of aggressive interest rate hikes in developed economies are becoming apparent, and risks in global financial markets are increasing. The momentum of world economic growth is fading, and the global economic recovery is sluggish. Competition among major countries and geopolitical conflicts have increased global political and economic risks, there is no end in sight to the Ukraine crisis, and global energy and food security are increasingly prominent issues. A significant shift is taking place in the international balance of power, a backlash against globalization is rising, with mounting unilateralism and protectionism, and turbulence and uncertainties in the external environment are on the rise, all of which have the potential to negatively affect our economy. Domestically, the foundations of our economic recovery remain unstable, with prominent imbalances and inadequacies in our development. Aggregate, structural, and cyclical problems remain, and we continue to face the triple pressures of contracting demand, supply difficulties, and weakening expectations. There are significant constraints on personal income growth, and there are obstacles to expanding consumer spending in the short term. Enterprises, especially micro, small, and medium-sized ones, face operational and production difficulties, and there is an unwillingness and inability to invest. Downward pressure on the global economy is being compounded by the effects of protectionism, making it more difficult for China to maintain stable export growth. China’s technological innovation capabilities are lacking, and there are still many obstructions and blockages in industrial and supply chains, making it difficult to ensure food security, energy security, and the security of major industrial and supply chains as well as to contain financial risks. There are still many tough issues to be addressed in the reform of key areas, and bottlenecks restricting the development of new systems for an open economy still remain. Weaknesses are still found in areas related to the people’s wellbeing, and the public face difficulties in areas such as employment, education, medical services, childcare, elderly care, housing, ecological conservation, and environmental protection.

While facing adversities and challenges head-on, we must also be keenly aware that peace and development remain the common aspirations of people of all countries, and a new round of scientific and technological revolution and industrial transformation is well underway, presenting us with new strategic opportunities in pursuing development. The Chinese economy continues to demonstrate strong resilience, potential, and dynamism, as the fundamentals underpinning its long-term growth are unchanged, and our development still benefits from the following solid foundations and favorable factors.

First is stronger political safeguards.

The 20th CPC National Congress charted the course for the CPC and the country and mustered the forces required to forge ahead. Going forward, we will uphold the strong leadership of the CPC Central Committee with Xi Jinping at its core and continue to be guided by Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era. This will enable us to form a mighty force to overcome all difficulties with one heart and one mind, making the historic process of rejuvenating the Chinese nation unstoppable.

Second is the strengths of our system.

Against the backdrop of a complex and grave international environment and unexpected impacts to domestic development, China’s socialist market economy has shown an ability to withstand risks and pass tests. The strengths of China’s socialist system of concentrating efforts and resources behind major undertakings and the efficacy of our macroeconomic policies are increasingly apparent. This year, existing and forthcoming policies will create synergies for high-quality development. The great ship of Chinese socialism is cleaving the waves and sailing confidently into the future.

Third is solid foundations for development.

Our economy is growing steadily, accounting for around 18% of the world economy in 2022, and our per capita GDP reached US$12,741, closing in on the high-income-country threshold. China has the best functioning industrial system and an increasingly complete infrastructure network. Efforts to optimize and upgrade our industrial structure are ongoing, and new drivers of growth are emerging rapidly. Our ability to ensure food security as well as energy and resource security is constantly improving, the resilience of our industrial and supply chains is increasing, and the material foundations for maintaining stable, healthy, and sustainable economic development have been consolidated.

Fourth is enormous market potential.

China has a population of 1.4 billion, and more than 400 million people are in its middle-income group. We have a very large market with the greatest growth potential in the world. As the effectiveness of our optimized Covid-19 containment measures materializes, consumer demand will gradually recover and new lifestyle consumption will increase. The transformation and upgrading of traditional industries, the development and growth of strategic emerging industries, and greater investment in shoring up weaknesses will all lead to sustained and rapid growth of effective investment. We will leverage our super-sized market and encourage the creation of a virtuous cycle between supply and demand, thereby continually unlocking China’s economic growth potential.

A worker conducts tests on low-voltage LED strip lights at a production line in the Smart Manufacturing Town, Ruichang City, Jiangxi Province, January 31, 2023. Following the Spring Festival, companies across the country quickly ramped up production to fulfill orders and cater to demand in domestic and overseas markets. PEOPLE’S DAILY / PHOTO BY WEI DONGSHENG

Fifth is our growing development momentum.

The effects of reforms in key areas and sectors are gradually emerging, institutional opening up is progressing in depth, and coordinated development across regions is being promoted, all of which is helping to optimize China’s business environment, gradually raise public expectation, and fortify confidence in our development. In January of this year, the Manufacturing Purchasing Managers’ Index (PMI) was 50.1% and the Non-Manufacturing Business Activity Index was 54.4%, marking a return to expansion and indicating that our economic recovery has good momentum. As we elicit the potential and vitality of all sectors of society, China’s economy will face broad and bright prospects.

III. Focusing on implementation and tenaciously completing economic work

We will strive to expand domestic demand.

Domestic demand is the fundamental driving force of China’s economic development, so its expansion is our foremost priority to achieve stable growth. To this end, we must determinedly implement the strategy of expanding domestic demand and adopt more forceful measures to create a virtuous cycle in social reproduction. We need to target our efforts at the principal challenges and crucial links, improve the system of macroeconomic governance, and implement the various policies on stabilizing growth that have already been promulgated. We also need to implement fully the outline for the strategy to expand domestic demand and the strategy to expand domestic demand during the 14th Five-Year Plan period (2021-2025). We must unlock consumption potential through combined measures, prioritize restoring and expanding consumption, and boost the incomes of urban and rural residents through multiple channels. We need to increase the spending power of the low- and middle-income population, in particular. We should also improve the environment and conditions, and encourage the upgrading, of consumption. We will support spending on home improvements, NEVs, elderly care, and educational, medical, cultural, and sports services, as well as foster new forms of consumption, such as the integration of online and offline consumption. We will increase effective investment. We will proceed with the 102 major projects outlined in the 14th Five-Year Plan in an orderly manner, step up major projects in key areas of economic and social development, and promote the construction of new types of infrastructure. We need to make good use of the coordination mechanism for advancing major projects to promote effective investment, coordinate the use of various funds, and strengthen support in terms of land provision, environmental impact assessments, energy, and other factors. We also need to encourage and attract more private capital to operate according to market principles in major national projects as well as projects aimed at strengthening areas of weakness.

A reporter tests out the BYD Atto 3 electric car on press day at the Brussels Motor Show, January 13, 2023. Several Chinese electric car brands garnered great attention during the media event for the motor show’s 100th edition. PHOTO BY XINHUA REPORTER ZHENG HUANSONG

We will accelerate the modernization of our industrial system.

The foundation of China’s new development dynamic is a modern industrial system, and unimpeded economic flows require orderly connections and efficient and smooth operations in every industry. We must take advantage of the fact that China has the world’s best functioning industrial system and its domestic market has the greatest potential. We need to focus on shoring up weaker industries, expanding competitive industries, upgrading traditional industries, and developing emerging industries. We need to improve the continuity of industrial development and raise competitiveness as well as modernize our industrial system further. We need to implement in depth the innovation-driven development strategy, improve the new system for mobilizing resources nationwide, and boost China’s strength in strategic science and technology. We will better allocate innovation resources, enhance our basic scientific and technological capacity, and accelerate the formation of a national laboratory system and breakthroughs in key core technologies. We need to implement industrial foundation reengineering projects, support enterprises that use special and sophisticated technologies to produce novel and unique products, and encourage the development of the manufacturing sector toward higher-end, smarter, and greener production. We will consolidate our leading position in industries where we excel, such as NEVs, and encourage the growth of strategic emerging industries such as AI, bio-manufacturing, and green and low-carbon technologies. We must promote further integration of modern services with advanced manufacturing and modern agriculture. We will accelerate the development of the digital economy, implement major projects such as the East-to-West Computing Capacity Diversion Project, and promote further integration of the digital economy with the real economy.

We will consolidate and develop the public sector and encourage, support, and guide the development of the non-public sector.

The 20th CPC National Congress and the Central Economic Work Conference reiterated our firm stance on this, and it provides essential guidance for upholding and improving China’s fundamental socialist economic systems and promoting high-quality economic development in the new era. We need to accelerate the building of a high-standard socialist market economy, advance reforms for the market-based allocation of production factors, develop a high-standard market system, and build a unified national market. We also need to improve the foundational market systems for property protection, market access, fair competition, and social credit, regulate and provide guidance in accordance with the law to promote the sound development of capital, and foster a world-class business environment that is market-oriented, law-based, and internationalized. We will further reform state-owned capital and state-owned enterprises, accelerate efforts to improve the layout of the state-owned sector and adjust its structure, enhance the core competitiveness of enterprises, and work faster to develop world-class enterprises. We will provide an enabling environment for private enterprises, encourage entrepreneurship, and support micro, small, and medium-sized enterprises and self-employed people. We will also protect the property rights of private enterprises and the interests of entrepreneurs in accordance with the law and stimulate strong development in the private sector.

We will implement major urban-rural and regional strategic plans.

Promoting coordinated development between urban and rural areas and between regions is a key way to solve unbalanced and inadequate development in China as well as a vital measure for unlocking the potential of domestic demand and promoting industrial upgrading. We need to promote all aspects of rural revitalization, continue to prioritize the development of agriculture and rural areas, consolidate and expand our poverty alleviation achievements, and build a beautiful and harmonious countryside that is desirable to live and work in. We will steadily advance people-centered new urbanization and work to grant permanent urban residency to eligible people who move from rural to urban areas. We will implement major regional strategies, including the coordinated development of the Beijing-Tianjin-Hebei region, further environmental protection and restoration as well as green and high-quality development in the Yangtze River Economic Belt, development of major cooperation platforms in the Guangdong-Hong Kong-Macao Greater Bay Area, integrated development of the Yangtze River Delta, and expansion of ecological conservation in the Yellow River Basin. We will fully implement the strategy of coordinated regional development, increase infrastructure connectivity between regions, and promote complementary and integrated regional development.

We will promote high-standard opening up.

Opening up is a basic national policy and a distinctive feature of China’s development, and our door will only continue to open wider. To this end, greater efforts are required to attract and utilize foreign investment. We must implement the latest version of the Catalog of Encouraged Industries for Foreign Investment and guide more foreign investment toward the fields of advanced manufacturing, modern service industries, high technology, and energy-saving and environmental protection, as well as toward the central, west, and northeast regions of China. We must improve foreign investment promotion services and protect the rights and interests of foreign investors in accordance with the law. We will promote high-quality development of Belt and Road cooperation, expand collaboration to promote healthy, green, digital, and innovative development, accelerate the development of the New International Land-Sea Trade Corridor in the western region, and ensure the safe and smooth operation of China-Europe freight rail services. We will improve the structure of foreign trade while keeping its scale stable, upgrade trade in goods, and develop new mechanisms for trade in services. We will also increase support for overseas warehouses and accelerate the development of the Hainan Free Trade Port.

We will promote the transition to green economic and social development.

Environmental protection and economic development are complementary and constitute a dialectical unity. Indeed, environmental protection is tantamount to safeguarding the latent and future potential of economic and social development. We must continue battling to keep our skies blue, waters clear, and lands clean and strengthen controls on plastic pollution and rural nonpoint source pollution. We will strive to move toward peak carbon emissions and carbon neutrality, exercise better control over the amount and intensity of energy consumption, and prioritize controlling fossil fuel consumption. We will transition gradually toward controlling both the volume and intensity of carbon emissions, promote clean, low-carbon, and high-efficiency energy use, accelerate the planning and development of a new type of energy system, and promote the construction of large-scale wind and photovoltaic power bases as well as hydropower and nuclear facilities. We need to strive to develop green and low-carbon industries and get people throughout society to adopt green and low-carbon lifestyles. We will implement a comprehensive conservation strategy to conserve resources of all types and use them efficiently.

We will take solid steps to safeguard people’s wellbeing.

The constant interest of our work is to safeguard and improve people’s wellbeing. We will uphold our people-centered philosophy of development, adopt more measures that deliver real benefits to the people and win their approval, resolve pressing difficulties and problems that concern them most, and ensure we meet their basic needs. We must promote top-level design of common prosperity, expand the size of the middle-income population, and better coordinate policies in the area of income distribution. We will ensure effective and thorough implementation of employment-first policies, improve the system for providing employment support to key groups, and stimulate job creation by encouraging business startups. Active steps will be taken to develop an old-age insurance system with multiple tiers and pillars. We will support people in buying their first home or improving their housing situation and ensure that overdue housing projects are completed and delivered to meet people’s basic living needs. We must take proactive steps to address population aging, improve the service system for elderly care and childcare, and implement policies and measures to boost the birth rate. We will further reform the medical and health systems and make more quality medical resources available and ensure that they are more evenly distributed among regions.

We will effectively prevent and defuse major risks.

Security is a prerequisite for development, and development ensures security. We must give equal weight to them and achieve positive interaction between high-quality development and high-standard security. We need to be more mindful of potential dangers, be prepared to deal with worst-case scenarios, and guarantee both development and security. We also need to deal with major risks that may arise, including properly handling issues in the areas of real estate, finance, and local government debt. We will strengthen safeguards in various areas of security, especially food, energy and resources, and major industrial and supply chains. We must comprehensively consolidate the foundations for food security, implement the food crop production strategy based on farmland management and applications of technology, and improve systems for the production, procurement, storage, processing, and sale of grain. We will strengthen energy supply safeguards, take orderly steps to increase advanced coal production, and ensure stable supplies of electricity and natural gas. We will also work toward greater self-reliance and greater strength in science and technology to make our industrial and supply chains more resilient and secure. 

(Originally appeared in Qiushi Journal, Chinese edition, No. 4, 2023)