ON THE NEW DEVELOPMENT DYNAMIC

ON THE NEW DEVELOPMENT DYNAMIC*

October 29, 2020

Full Understanding of the New Development Stage

A milestone in China’s progress, the new development stage is the period of building a modern socialist country in all respects and marching towards the Second Centenary Goal. We should understand this new stage from both a historical and contemporary perspective, and in terms of both theory and practice.

First, entering the new development stage marks a great advance towards our national rejuvenation. I have said that national rejuvenation has been the greatest dream of the Chinese people since China’s modern era began in 1840. Due to foreign invasion and corrupt feudal rule, China missed the opportunity for an industrial revolution, and fell far behind the times. Our nation suffered unprecedented misery. 

After the Opium War of 1840, reformists led the call for change and the Chinese people began the painstaking search for a road to modernization. The Plan for National Reconstruction written by Dr Sun Yatsen in the late 1910s was China’s first blueprint, but the drive ended in failure as it was simply impossible to modernize a semi-colonial and semi-feudal society. 

Over the past hundred years since the founding of the Communist Party of China in 1921, all the efforts made by the CPC and by the Chinese people under its leadership have served just one purpose – building China into a strong modern country and realizing national rejuvenation. After the founding of the PRC in 1949, our Party led the people in exploring all possible paths to China’s modernization. In his Report on the Work of the Government delivered at the First Session of the First National People’s Congress in 1954, Zhou Enlai pointed out, “Unless we establish powerful, modern industry, modern agriculture, modern communications and transport and a modern national defense, we shall neither shake off backwardness and poverty nor attain our revolutionary goals.” In 1956, Mao Zedong said, “Our people should have an ambitious plan and strive to reverse backwardness in the economy, science and culture within decades and quickly reach the world’s advanced level.” He also warned that if we failed to achieve this we should be “scoured from the earth”. In December 1964, in his Report on the Work of the Government to the First Session of the Third National People’s Congress, Zhou proposed a further plan, “We may envisage the development of our economy in two stages beginning with the Third Five-year Plan. The first stage is to build an independent and relatively comprehensive industrial and economic structure; the second stage is to accomplish the overall modernization of agriculture, industry, national defense and science and technology, so that our economy will be among the front ranks of world economies.” Although the plan did not come to full fruition due to the turmoil of the Cultural Revolution, from 1949 to 1978 our Party on the whole succeeded in leading the people in establishing from scratch an independent and relatively complete industrial and economic structure and in safeguarding national sovereignty and security. China made substantial progress in its socialist construction.

After we launched reform and opening up in 1978, Deng Xiaoping proposed a three-step strategic plan for modernization: ensuring that the people would have adequate food and clothing by the end of the 1980s; giving them a moderately prosperous life by the end of the 20th century; increasing the per capita GNP level to that of moderately developed countries and realizing basic modernization by the middle of the 21st century. By the turn of the 21st century, moderate prosperity had largely been achieved. We then introduced the goals of achieving moderate prosperity at a higher level for all by the centenary of the CPC in 2021, and in approximately three more decades, achieving basic modernization and turning China into a modern socialist country by the centenary of the PRC in 2049. 

Since the 18th CPC National Congress in 2012, socialism with Chinese characteristics has entered a new era. The Chinese nation has achieved the tremendous transformation from standing up and becoming better off to growing in strength. On this foundation, our Party drew up a plan at its 19th National Congress in 2017 to attain the Second Centenary Goal in two stages: realizing basic socialist modernization by 2035, and developing China into a great modern socialist country that is prosperous, strong, democratic, culturally advanced, harmonious, and beautiful by the middle of the 21st century. 

Turning China into a modern socialist country has been the theme of all 14 five-year plans. Despite occasional missteps, and in the face of many unexpected difficulties and setbacks, our determination and our resolve to reach this goal have never wavered. We have expanded our understanding of this grand program, improved our strategies, and broadened our experience. All of this has paved the way for China’s drive to modernization, and laid practical, theoretical and institutional foundations for fully building a modern socialist country in this new development stage. 

Second, our success in building a moderately prosperous society in all respects and eliminating absolute poverty have created favorable conditions for building China into a modern socialist country. As the decisive stage for realizing moderate prosperity, the 13th Five-year Plan period (2016-2020) has witnessed momentous achievements. China has scaled new heights in economic development, scientific and technological capability, and composite national strength. China’s per capita GDP has surpassed US$10,000, and its GDP this year is expected to top RMB100 trillion. A total of 55.75 million rural residents have shaken off poverty during these five years, and absolute poverty will become a thing of the past in China by the end of this year. We have made major breakthroughs in further reform, continued to expand opening up, and achieved unprecedented results in building an eco-civilization. China has put in place the world’s largest social security system, with over 1.3 billion people covered by basic medical insurance and almost 1 billion people by basic old-age pension schemes. People’s lives have improved remarkably. There is no doubt that all goals in the 13th Five-year Plan and the target of building a moderately prosperous society will be achieved as scheduled.

The realization of these goals as scheduled marks a new step forward for the rejuvenation of the Chinese nation – no longer falling behind but keeping abreast with the times.

Third, China’s socialist modernization has many particular characteristics. There is no such a thing as a single authorized model of modernization, nor a universally applicable standard of modernization. Deng Xiaoping once said, “The modernization we are striving for is modernization of a Chinese type. The socialism we are building is a socialism with Chinese characteristics.” While sharing some common characteristics with other countries, our modernization has some unique features adapted to the realities of China. 

One, our modernization is for a huge population. Success in modernizing a country of 1.4 billion people – a population that exceeds in size the combined total of all the developed countries – will completely change the international landscape and have a far-reaching impact on humanity. 

Two, our modernization aims at common prosperity for everyone, which is an essential requirement of Chinese socialism. Committed to the people-centered philosophy of development in our drive for modernization, we have proactively addressed regional divides, disparities between urban and rural areas, and the gap in income distribution. We have promoted social fairness and justice, worked towards common prosperity for all our people, and stood firmly against polarization between rich and poor. 

Three, our modernization balances material and cultural-ethical progress. It upholds the core socialist values, strengthens education on ideals and convictions, spreads splendid traditional culture, boosts the people’s moral strength, and fosters material abundance and the well-rounded development of all. 

Four, our modernization features a harmonious coexistence between humanity and nature. When we modernize our country, we strive to synergize material and eco-environmental progress, and follow a path of sound development that ensures economic growth, better lives, and a good environment; otherwise the pressure on resources and the environment will simply become unbearable. 

Five, our modernization follows a path of peaceful development. Some of the old capitalist countries pursued modernization through violent exploitation of colonies and at the cost of other countries’ development. In our modernization drive, we emphasize mutual benefit with other countries, strive for a global community of shared future, and work to deliver peace and development to humanity.

Past experience shows that the Chinese path to modernization fits China’s realities. It respects the laws governing the development of socialism and human society. We should press ahead with our modernization to drive forward our national rejuvenation and contribute more to humanity.

Importance of a New Development Dynamic 

We have decided to create a double development dynamic with the domestic economy as the mainstay and the domestic economy and international engagement providing mutual reinforcement. This policy decision was made in the context of our current development stage, environment, and changing conditions, and in particular the changes in our comparative strengths. This is a strategic plan based on the prevailing situation in China and oriented towards the future – a plan that will bring a systemic and profound change to China. We should understand this strategy from an overall and strategic perspective.

In essence, this is a step that we must take in order to adapt to our new development stage and gain a new edge in international cooperation and competition. Before we launched reform and opening up in 1978, the domestic market was the mainstay of our national economy, and imports and exports accounted for only a small share. Later we opened up to the outside world to expand foreign trade and attract more foreign investment. Since we acceded to the World Trade Organization in 2001, we have fully participated in the international division of labor and engaged with the international market. A development dynamic relying on the international market for the supply of resources and sales of products took shape. Riding on the waves of economic globalization, this played a pivotal role in our rapid economic growth and the improvement of our people’s lives. 

The global financial crisis was a watershed in the evolution of our development dynamic. In the face of daunting external crises, we stimulated domestic demand to bolster steady and rapid growth and to make it the main engine of our economy. There has since been a significant increase in the share of domestic market in our economy. After the 18th CPC National Congress in 2012, we continued our policy of expanding domestic demand, and our economic development was driven more by domestic demand, especially by consumption. Our country’s trade-to-GDP ratio dropped from a high point of 67 percent in 2006 to nearly 32 percent in 2019. The proportion of the current account surplus in GDP has also fallen from over 10 percent at its peak to around 1 percent at present, and the contribution of domestic demand to economic growth exceeded 100 percent in seven years. Our policy to create a new development dynamic is based on China’s economic conditions and its development trend. It is a practical blueprint. 

In the coming years, the dominant position of the domestic market in our economy will become more apparent, and the potential of domestic demand will be further unlocked. In terms of demand, with 1.4 billion people, including a middle-income population of more than 400 million, China will soon surpass the US to rank first in the world in retail sales, still leaving room for further growth. In terms of supply, our strong production capacity based on the huge domestic market can facilitate the integration and innovation of factors of production worldwide, and maximize the effects of economies of scale and agglomeration. As long as we continue to adapt to changing circumstances and implement precisely-targeted policies, we have all the strengths to create a new development dynamic and gain a new competitive edge. 

First, creating the new development dynamic is neither a passive response to pressure nor a stopgap measure, but a proactive move aiming to seize the initiative in development. Looking around, we can see that the other major economies are dominated by their domestic demand, with smooth internal economic flows. China is now the world’s second largest economy and largest manufacturing country. The need to adjust the relationship between the domestic economy and international engagement has become increasingly apparent. This was our primary consideration when we put forward this strategy. In the face of growing international instability and uncertainty, we should increase reliance on our domestic market, unleash the potential of domestic demand – which will reduce our exposure to external shocks and the impact of falling foreign demand – and ensure normal functioning of the economy and general stability in society in extreme circumstances.

Second, what we aim to create is an open development dynamic, rather than an enclosed domestic model. Our country is deeply integrated into the global economy. Our economy interacts with and is dependent on the industries of many other countries on a mutual basis. The internal and external markets are interdependent in a relationship of mutual reinforcement. Taking the domestic economy as the mainstay does not mean we run the economy behind closed doors. Instead, we will improve the interaction between domestic and international markets and increase our ability to participate in the allocation of global resources by unlocking the potential of the domestic economy, attracting more global resources and factors of production into the domestic market, and taking full advantage of both domestic and international markets and resources. In doing so, we will gain a strategic edge in our opening up. We will not close our doors to the world; we will only open our doors even wider. We must understand the relationship between the domestic economy and international engagement. We will take proactive and effective action to establish new mechanisms for a higher standard open economy, and open up on a larger scale, across more areas and in greater depth.

Third, the new development dynamic must be built upon a unified national market, not on small and fragmented local markets. The Central Committee’s strategy targets the whole country – it does not require localities to create an isolated dynamic within their respective province, city or county. Every area should find its own position and comparative strengths in the domestic economy and the new development dynamic, combine this strategy with other initiatives on regional development, coordinated development between regions, functional zoning, and pilot free trade zones, and reach new heights in reform and opening up. No area should try to build an all-inclusive local economy, or to create regional barriers in the guise of internal economic flow. Areas where conditions permit may explore ways to facilitate the new development dynamic across the country as forerunners.

It is imperative to follow the new development philosophy in creating the new development dynamic. It has been five years since we put forward this philosophy. All sectors have reached agreement on this philosophy, and are applying it to the full in practice. Creating a new development dynamic is essential for applying the new development philosophy, which is determined by both historical trends and present needs. We should adopt systems thinking, be forward-looking, plan the broader picture, organize strategies, and implement them as a whole. We need to synergize policies, ensure mutual reinforcement of different sectors, and expand the application of the new development philosophy. 

Priorities in Creating the New Development Dynamic 

The creation of the new development dynamic is a systematic project. We should “strengthen planning and design at the top level”, and “delegate specific tasks to lower levels” with priorities assigned. 

First, accelerating the process of fostering a complete domestic demand system. This is an important foundation for boosting the domestic economy and reinforcing its status as the mainstay of the new development dynamic. Economic activities constitute a dynamic process that rotates and moves in cycles. We should promote deeper reform, strengthen policy guidance, and remove key bottlenecks in economic flows. To meet domestic demand, we should integrate the strategy of expanding domestic demand with supply-side structural reform, and attune the supply system closer to domestic demand. The goal is to reach an ideal dynamic equilibrium, where demand drives supply and supply in turn creates demand. We need to build a modern logistics system as a key foundation for the new development dynamic, improving both “hardware” and “software”, channels and platforms.

Second, accelerating progress towards greater strength and self-reliance in science and technology. This is the key for China to ensure a smoothly functioning domestic economy and increase its competitiveness in the global economy. We should heighten our sense of responsibility and awareness of crisis, dispense with any illusions, and look reality in the face. We need to make breakthroughs in core technologies in key fields, and remove bottlenecks in major areas. We should rouse the enthusiasm of our people for innovation, train and attract talent in all fields, give full play to their knowledge and strength, nurture more world-class scientific and technological leaders and innovation teams, and build a reserve force of young scientists who have a competitive edge on the international stage. We should create a favorable environment for scientists and students who have returned from abroad, in which they may live, work, study, and conduct R&D in comfort, and place them in suitable posts so that they can fulfill their potential and contribute to the country. 

Third, optimizing and upgrading industrial and supply chains. This is urgent if we are to secure the dominance of the domestic economy and increase China’s ability in advancing international engagement. Manufacturing is critical to our economy and serves as the foundation of our national security and strength. In the fight against Covid-19, our well-developed manufacturing industry has played a crucial role, which once again proves the significance of the manufacturing sector to the development and security of a country, especially a large country. 

Therefore we should prioritize efforts to make our industrial chains more resilient and competitive, and to establish industrial and supply chains that are self-supporting, controllable, secure and highly efficient. We should thoroughly analyze the industrial and supply chains for key industries, identify and address weak points that are susceptible to risk, design tailored plans and targeted policies for different industries, and gradually improve self-reliance and risk control in industries and fields bearing on national security. We should take strong measures to keep our enterprises well-grounded in the domestic economy, and encourage industries to transfer within the country in an orderly manner, or keep the key elements of the industrial chains in China when they move abroad.

Fourth, modernizing agriculture and rural areas. Economic flows between urban and rural areas are an important element of the domestic economy, and a crucial factor that ensures an appropriate balance between the domestic economy and international engagement. Modernizing agriculture and rural areas is also an important part of building a modern socialist country in all respects, and an essential part of addressing imbalanced and insufficient development. The whole Party should continue to give top priority to matters related to agriculture, rural areas, and rural people, and implement the rural revitalization strategy in an all-round way. We need to consolidate and expand poverty elimination results and effectively integrate such results with rural revitalization, further revitalizing all once-impoverished areas, promoting economic and social development, and improving people’s lives there. Ensuring a secure supply of grain and other major agricultural products is of paramount importance among all the matters related to agriculture, rural areas, and rural people. We should never take the issue of food security lightly, and we must ensure basic self-sufficiency in grain and absolute security of staple foodstuffs, so that we always have control over our own food supply. We should promote supply-side structural reform of agriculture, optimize the produce mix and distribution of production areas, and reinforce the grain production zones, the protected areas for key agricultural produce, and the areas producing local specialties.

Fifth, improving quality of life. This is the fundamental purpose of ensuring unimpeded flows in the domestic economy, and a key element driving the mutual reinforcement between the domestic economy and international engagement. Satisfying the people’s changing demands, improving their wellbeing in all respects, and ensuring a better life for all are the ultimate goals of socialist production. Optimizing the income distribution structure and expanding the middle-income group can strengthen the endogenous momentum of high-quality development, which is a key link in ensuring unimpeded flows in the domestic economy. We should continue with multiple models of distribution with “to each according to their work” as the principal form, increase the proportion of the remuneration for labor in the primary distribution of gross national income, establish a reasonable wage-growth mechanism, and guarantee wages and the rights and interests of laborers. We should continue to expand the middle-income group and pilot ways to increase earnings for middle-and low-income groups, such as through the right of use of land, capital, and other factors of production and the right to enjoy the proceeds from them. Adopting a problem-oriented approach, we must do more to improve the lives and address the concerns of the people, do everything in our capacity to strengthen areas of weakness, and make steady progress towards common prosperity, so that our people will have a greater sense of gain, fulfillment and security.

Sixth, ensuring security-based development, which is a red line. This is also an important precondition and guarantee for the new development dynamic, and is essential for the smooth flow of the domestic economy. At this plenary session, the Party Central Committee has drawn up a strategic plan for ensuring both development and security, which is an effective guideline for China’s economic and social development in complex circumstances. We should adopt a holistic approach to national security and strengthen our national security system and capability, placing national interests above everything else, with political security as the foundation and people’s safety as the ultimate goal. We need to properly balance opening up and security, build a tight safety net for opening up, and increase our ability to safeguard national security in this environment. Safeguarding people’s lives is our top priority, and we must raise our ability to ensure public security. We must do everything possible to ensure that the people live and work in contentment, that society remains stable and orderly, and that our country enjoys enduring peace and stability.

∗ Part of the speech at the second full assembly of the Fifth Plenary Session of the 19th CPC  Central Committee.

(Not to be republished for any commercial or other purposes.)