Foster a New Development Dynamic to Seize Future Opportunities

Foster a New Development Dynamic to Seize Future Opportunities*

January 31, 2023

To rapidly create a new development dynamic is a strategic task proposed at our Party’s 20th National Congress in 2022. Today, the Political Bureau is holding its second group study session, with a specific focus on this topic. The primary goal is to build a deeper understanding of the significance of fostering the new development dynamic, in the context of our study and application of the guiding principles outlined at the 20th CPC National Congress and the Central Conference on Economic Work. We are going to examine the problems existing in our work, and devise effective measures to resolve the primary challenges hindering the creation of the dynamic.

In April 2020, at the meeting of the Central Commission for Financial and Economic Affairs, I proposed creating a new development dynamic with the domestic economy as the mainstay and the domestic economy and international engagement providing mutual reinforcement. Since then, experience has given us a deeper understanding of the strategic importance of this dynamic, and we have formulated more effective approaches. From now on the central task of our Party is to unite the Chinese people of all ethnic groups and lead them in a concerted effort to realize the Second Centenary Goal of building China into a great modern socialist country, and to advance the rejuvenation of the Chinese nation through a Chinese path to modernization. China’s population of more than 1.4 billion exceeds the combined total of all developed countries in the world today, and modernizing a country of this size is a task of unparalleled difficulty and complexity. Therefore, in order to steer development, we must not lose hold of the initiative. China’s supersized economy necessitates and enables the maintenance of a smooth domestic economic flow.

Accelerating the creation of a new development dynamic is a strategic decision that can effectively balance development and security in our efforts to achieve the Second Centenary Goal. It serves as a strategic plan to ensure our future development remains under our control. Only by expediting the establishment of the new dynamic can we secure a solid foundation for economic growth, increase the security and stability of our development, improve our resilience and our capacity to withstand competition, and sustain development in the face of any challenges or difficulties, whether anticipated or otherwise. This way, we can ensure our pursuit of national rejuvenation is neither delayed nor interrupted, and we can finally achieve our goal of building a great modern socialist country in all respects.

Over the past two years, we have made solid progress and delivered tangible results. We have reached a firm consensus, laid sound foundations for our continued endeavors, and improved our policy framework. Some regions have made significant progress in contributing to and integrating into the new development dynamic. Nevertheless, our field studies have still identified some prominent issues that require close attention, earnest analysis, and effective resolution.

From a broad perspective, there remain onerous tasks and a considerable journey ahead if we aspire to establish the new development dynamic. To quickly create the new dynamic, we should approach our research and planning from two dimensions. First, we must adopt targeted measures to strengthen the weaknesses in our industrial and supply chains to ensure unimpeded flows within the national economy. Second, we must boost the intrinsic dynamism and reliability of our domestic economy, sharpen our international competitive edge, and amplify our appeal and influence within the global economic landscape. To achieve these, we must embrace a problem-oriented approach and systems thinking. Our focus should be on resolving the primary challenges and problems hindering the creation of the new development dynamic. We must drive deeper all-round reform and break new ground in institutions and approaches, while leveraging our strengths and mitigating our shortcomings.

First, we should boost domestic demand and advance supply-side structural reform, thereby improving the dynamism and reliability of the domestic economy. The key to creating the new dynamic is to ensure an unimpeded economic flow — the realization of which largely hinges on generating strong impetus, a dynamic and balanced equilibrium, and synergistic interactions in both supply and demand. This requires aligning the strategies of expanding domestic demand with supply-side structural reform, and making simultaneous and coordinated efforts to boost both supply and demand, with the goal of achieving an optimal dynamic equilibrium and a virtuous cycle within the national economy, where demand propels supply and supply in turn generates demand.

We must implement the strategic blueprint for expanding domestic demand, and promptly create a complete framework that prioritizes boosting consumer demand through income support, fostering investment demand with reasonable returns, and increasing financial demand with constraints on capital and debt. It is important that we establish a sustainable mechanism that stimulates consumer spending. This is done through granting citizens a stable source of income, reducing their financial concerns, and creating a consumer-friendly environment. It is also essential that we improve the mechanism to boost investment. This will be achieved by expanding the scope for effective investment, developing appropriate new infrastructure with future utilization in mind, increasing investments in high-tech and strategic emerging industries, and consistently encouraging private investors.

We must further intensify supply-side structural reform, drive scientific, technological and institutional innovation, address bottlenecks and vulnerabilities that impede supply, boost the competitiveness and security of our industrial and supply chains, meet existing demands with self-reliant, controllable and high-quality supply, and foster and guide new demand.

The serious imbalance, mismatch, and constrained flow between supply and demand are among the root causes of major risks in the economic and financial sectors. Therefore, coordinating our efforts in expanding domestic demand and furthering supply-side structural reform will also help to prevent and resolve risks in these sectors.

Second, it is imperative to increase our strength and self-reliance in science and technology. In today’s world, science and technology are the primary productive forces and the foremost drivers of competitive edge. We should therefore improve the system in which the Party Central Committee exercises unified leadership over science and technology, in order to ensure that China’s strength in strategic science and technology increases, the allocation of innovation resources is optimized, and resources are mobilized nationwide to make key technological breakthroughs. Our goal is to position our country at the forefront of key scientific and technological fields, and to establish our country as a trailblazer in frontier and interdisciplinary domains, as we strive to become a global hub for science and innovation as rapidly as possible.

We should encourage effective interaction between the strategy for invigorating China through science and education, the strategy for building a talent-strong country, and the strategy for innovation-driven development, thereby forming a positive dynamic that facilitates synchronized progress in education, innovation, and talent training. We should also coordinate the planning of original innovation, integrated innovation, and open innovation to ensure they are effectively aligned, and integrate innovative, industrial and talent chains through holistic plans.

Third, we should accelerate the building of a modern industrial system, to consolidate the industrial foundations for the new development dynamic. The dynamic is built upon a modern industrial system, and an unimpeded economic flow requires orderly and efficient interconnection among all sectors. Currently, the global industrial system and industrial and supply chains are undergoing a significant transformation, characterized by diversified distribution, regional cooperation, environmental sustainability, and accelerating digitalization. This reflects the underlying laws of economic development and the prevailing trends of our times, something that is independent of human will. In pursuing economic growth, we should continue to focus on the real economy, advance new industrialization, boost our strength in manufacturing, cyberspace, and digital development, improve the quality of products and services, and cultivate digital industry clusters that are competitive on a global scale.

To align with the overall trend in industrial development, we should coordinate industrial upgrading and transfer across timelines and regions. We should help weaker industries to remedy deficiencies, stronger industries to extend their reach, traditional industries to upgrade production chains, and emerging industries to build up new industrial chains. These efforts will make our industrial development more sustainable and competitive. It is also imperative that we further reform the mechanisms for coordinating regional development strategies and boosting market integration, optimize the distribution of productive forces, promote the orderly transfer of key sectors within and beyond China’s borders, encourage enterprises to engage in the global industrial division of labor and cooperation, and advance the integration of industries in and outside China. Through these efforts, China will build a modern industrial system that is independent, controllable, safe, reliable, and highly competitive.

Fourth, we should foster coordinated development between urban and rural areas and across regions to expand the domestic economic flow. The domestic economy will realize its full potential and improve in quality only when urban and rural areas and different regions develop in a coordinated manner. Rural areas offer a vast consumer market and a massive factor market, playing an important role in the domestic economic flow. We should fully leverage the vital roles of rural areas in these two markets, and comprehensively promote rural revitalization, as we advance urbanization centered on county seats, boost integrated development between urban and rural areas, strengthen their economic connections, and facilitate seamless economic flows.

Additionally, we must prevent the fragmentation of local markets and remove regional barriers to build a truly unified national market. It is also important that we facilitate the greater integration of diverse strategies — such as the strategy for coordinated development between regions, major strategies for regional development, and the functional zoning strategy — while optimizing the distribution of major productive forces, promoting the rational movement and efficient concentration of various production factors, and ultimately fostering unimpeded domestic economic flows.

Fifth, we should drive reform and opening up to a deeper level, injecting greater impetus and vitality into the new development dynamic characterized by the interplay between the domestic and international economic flows. We will advance reforms aimed at market-based allocation of production factors, put in place a high-standard market system, and speed up our efforts to build a unified national market. We should refine the systems that underpin the market economy, such as those related to property rights protection, market access, fair competition, and social credit. We will enact stricter measures against monopolies and unfair competition while providing regulation and guidance to promote the healthy development of capital. Additionally, we should cultivate a favorable environment for diverse market entities to invest and launch businesses, thereby improving their vitality. It is imperative to advance reform of the fiscal and financial systems. We should modernize the frameworks of fiscal policy, taxation, and finance by upgrading the budget system, optimizing tax structures, and improving transfer payment systems. We should also put in place a modern central banking system, strengthen and refine the financial regulatory system, and reinforce the systems that safeguard financial stability, while improving the functions of the capital market and fully leveraging its positive role.

We should promote high-standard opening up. Conforming to the most demanding international trade and investment rules, we are committed to expanding institutional opening up in terms of rules, regulations, management and standards, so that China can play a more significant role in the dynamics of the global economy. To foster new drivers for our global engagement, we will optimize our planning of regional opening up, accelerate the construction of the New International Land-Sea Trade Corridor in the western region, work faster to develop the Hainan Free Trade Port, and further upgrade pilot free trade zones. We will internationalize the Renminbi in an orderly manner, protect the lawful rights and interests of foreign investors, and build new strengths for our participation in international economic cooperation and competition. We will promote high-quality Belt and Road cooperation, remain actively involved in negotiations on international economic and trade rules, contribute to the establishment of an open, diverse and stable world economic order, and create conditions for amplifying the interplay between domestic and international markets and resources.

* Main part of the speech at the second group study session of the Political Bureau of the 20th CPC Central Committee.

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