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At China's 2024 Two Sessions meeting, the Government Work Report called upon China to modernize its industrial system and embrace "new quality productive forces." The term was first coined by Chinese President Xi Jinping during his trip to the "Rust Belt" of China – the Northeast of the country.
The rejuvenation of rural areas, especially in inland areas like Central and Northwestern provinces, and previously industrialized but now struggling ones in the Northeast,2 is a core tenet of Xi's economic vision. Such rejuvenation serves as a crucial process in ensuring that prosperity is accessible to all Chinese citizens, as opposed to solely those who have the privilege of residing in or moving to more affluent areas, such as coastal provinces.
Xi's words during his visit reflected a significant emphasis on a more balanced developmental approach across different regions and foreshadowed highly comprehensive macroeconomic reforms seeking to emancipate and leverage the hitherto-inhibited labor productivity in less developed regions of China. His recommendations also highlighted the significance of China's efforts to continuously enlarge its high-potential middle-class population, which would provide the world with a leading consumption market over the coming decade.
It would be erroneous for external observers to dismiss this proposed concept as merely a rebranded or rehashed version of the "Made in China 2025" initiative expounded by President Xi and Premier Li Keqiang in May 2015. A more accurate interpretation of the "new quality productive forces" proposal is that China is keen on shifting away from being a purely catch-all manufacturing powerhouse to a globally competitive economic force with a comparative advantage in nascent, cutting-edge technologies and advanced manufacturing. Nurturing and harnessing new quality productive forces is hence the next stage in China's industrial transformation.1
Making Sense of New Quality Productive Forces – An Interpretation
New quality productive forces consist of several core components.
The first is an emphasis on total factor productivity (TFP) enhancement. Growth in TFP denotes output growth that cannot be attributed to growth in labor or capital: it reflects production efficiency, advancements in innovation and technical frontiers, and the results of organizational and management improvements. It amplifies the value of labor and capital, even if the latter remains constant. Xi's report to the 20th National Congress of the Communist Party of China explicitly referenced this economic concept in Section 4, "Accelerating the Creation of a New Development Pattern and Pursuing High-Quality Development."3
Chinese leaders are acutely aware that as the largest contributor to economic growth in recent years, bolstering TFP is crucial to the economy and its future trajectory.4 Whilst certain scholars have recently alluded to a purported decline in TFP over the past decade,5 it is evident that there is much China can and will do to improve its economic productivity. This can be achieved through streamlining and targeting scientific research toward strategically vital technologies.
The second component is the incorporation of "innovation and sustainability," key objectives of "China's new development philosophy," into the country's production apparatus and processes.6 As a world-leading power in sustainable transition and the promotion of nascent renewable energy technologies, China has undergone groundbreaking transformations in terms of environmental and industrial policies over the past decade to address the daunting challenge of climate change.
The shift toward electric vehicles, wind and solar energy, or even nuclear energy, could not be accomplished without holistic and qualitative uplifting of the country's productive forces. It is not solely about the numbers, but the quality offered by the production capacity.
With that said, so long as state-owned enterprises work in tandem with an empowered private sector that moves to regain momentum and confidence, China's path to sustainable innovation remains clear and promising. The "new quality" of the advocated productive forces will likely manifest through continuous strengthening of secondary and tertiary education infrastructure, increased investment in efficacious and cost-effective research, and heightened focus on and facilitation of start-up entrepreneurship and inventors working at the intersection of sustainability, technology, and social impact.
The third component is the embedding of pragmatic pluralism into developmental trajectories. There is an oft-asserted mantra in some circles that China's developmental model must be fundamentally opposed to non-Chinese, specifically Western developmental models. Yet this is a misconception that unduly conflates difference with opposition. As President Xi noted recently, China does not believe in "adopting just a single model of development." He also affirmed that "developing new quality productive forces does not mean neglecting or abandoning traditional industries."7
These insights crucially demonstrate that it is only through drawing upon the best of existing and past models, as well as channeling the collective wisdom of China's economic academia, government officials, and private sector, that China can develop a sustainable and viable path of industrial improvement and reform. Most of these so-called "old" sectors, whether it be property or digital platforms, will continue to play an important role in the years to come, not only given their significant contribution to employment, but also because of the need for a balanced economic portfolio overall.
The Case for Comprehensive Strategic Autonomy
I now turn to the argument that the development of new quality productive forces is critical to China's ability to achieve comprehensive strategic autonomy on the world stage. Some clarifications of this concept, which I draw partial inspiration from European geo-strategy,8 are duly needed.
To be clear, autonomy on the world stage here does not denote hegemony or dominance. As Chinese leaders have explicitly stated, and as any sound political observer could reliably note, hegemony is both costly and risky to maintain for any individual country. As a pragmatic nation, China is unlikely to pursue the same model as the hegemonic powers of the past, such as the UK until the mid-20th century, or the US thereafter, both of which governed extensive overseas territories, maintained overseas military presence, and waged devastating wars. Instead, autonomy closely aligns with the Chinese people's ability and right to defend their interests on the international stage, live according to their cultural and social norms, maintain the defined social contract with their government, and contribute to a world where global challenges can only be addressed through multilateral cooperation.
The discretion afforded by such autonomy must be exercised strategically – that is, China should be able to secure the interests of its people without harming its neighbors or significant partners. A core tenet of Mencius' account of "Wang Dao," in contrast to the force-oriented "Ba Dao," as touted by Han Fei and Shang Yang, is that leaders should lead by genuinely winning over the hearts and minds of people. When applied to foreign policy and diplomacy, "Wang Dao" calls upon countries to pursue, strengthen, and project soft power, which enables others around the world to view them not as threats, but as pioneers and anchoring figures worthy of respect. Legitimacy stems not from violent force or military might, but from strategic and transformative value-based leadership. In my view, this is what differentiates "un-strategic" autonomy from "strategic" autonomy.
The autonomy in question must be comprehensive in at least two ways – dimensionally and in relation to other countries and non-state actors, such as corporations and investors. The rise of China as a manufacturing powerhouse and market over the past few decades has positioned the country as a key node in the global economy – one that can withstand the vacuous cries for "de-coupling" by sheer virtue of its technological maturity, industrious work ethic, and substantial manufacturing population base unique to the country.
Beyond the commercial aspects, the incumbent leadership has commenced active development and articulation of its own approach to technological, political, and industrial governance. Whilst the jury is still out on whether such efforts will eventually pay off, it is evident that the Chinese leadership has awakened to the reality of supply chain resilience, self-sufficiency in strategically sensitive sectors, combining digitalization with infrastructural developments to ensure that digital technologies are harnessed for good use. Such recognition is pivotal: the Chinese state cannot be "globally autonomous" unless it possesses autonomy in a rich multitude of dimensions – including the economic, financial, technological (especially in artificial intelligence, quantum computing, nanotechnology, and biotechnology), and political ones, to name but the core few.
There are also questions about partnerships that China may opt to establish. In an era of globalization, despite challenges like the attenuation of financial integration and inter-connectivity, or supply chain disruptions due to the pandemic and geopolitical conflicts, no country can survive alone. Yet China must ensure that its choice of collaboration does not unduly and inadvertently aid forces bent on containing and hindering its rise, and that its openness and connectivity with other powers does not become a liability by creating over-dependence on other states.
New Quality Productive Forces Have a Role to Play in China's Search for Comprehensive Strategic Autonomy
With the above measures, we should be able to see how the two conceptually impressive frameworks come together.
First, new quality productive forces play a central role in writing the next chapter of this story. As many have noted, the days when China could lean into unbridled, investment-led growth in the property sector and exports to a few select markets like the United States and the European Union as core economic pillars are now over. The former is unsustainable due to excessive leveraging, which the incumbent administration has swiftly redressed through a series of difficult but necessary decisions. The latter has become increasingly difficult due to the ideological nature of geopolitics and the structural competition between China and the US.
To remain a truly autonomous actor free from economic coercion and potential sabotage by rivals and competitors, China must diversify beyond traditional industries, and seek to build up a resilient middle class with salubrious household incomes. Recently, Zhang Jun, the Dean of the School of Economics at Fudan University, has proposed a "Household Income Doubling Plan" designed to tackle the difficulties in the post-COVID era.9 His recommendations hold significant merit.
Second, China must pursue dynamic self-sufficiency through selectively opening its economy to existing and prospective partners, whilst minimizing undue risks accrued from exposure to external actors with insidious intentions. Autonomy requires both security from foreign interference and sustainability in economic vitality. This is why Chinese regulators continually reduce barriers to trade, investment, and joint ventures with receptive and constructive international businesses. It also demonstrates that non-politicized cooperation with home-grown Chinese champions can yield stable benefits.
Chinese enterprises should seek to bolster empathetic candor and transparency in communications and engagement efforts with foreign firms, whilst adhering to national security principles. In lieu of viewing foreign-domestic partnerships as a zero-sum game with restrictive knowledge transfers, Chinese firms can afford to identify areas for joint innovation where benefits are shared, while also carefully and explicitly delineating areas where national security considerations take precedence. This delicate balance involves preventing excessive reliance on external forces whilst maintaining China's appeal as an attractive destination for foreign investors.
Finally, the best China story is one that highlights the country's resilience as an economic powerhouse based upon both the physical and virtual economies, rather than merely relying on the latter. Whether it is productivity gains contributing to the raw growth figures or broader improvements to the average quality of life through expanded infrastructural coverage, structured and methodical urbanization, or the refinement and uplifting of human capital through high-quality higher education, the ideal China story is the story of holistic development. It is this story that critically anchors the country's soft power internationally and heightens the attractiveness of its government's distinctive outcome-oriented pragmatism to countries that are wary and disillusioned with the neoliberal logic oft-heralded as conventional wisdom in Western economics.
Fundamentally, as China continues to rise as a responsible global power, there is much that its leaders and people can do – together – in unleashing the productivity that remains untapped within the population.
1. "New Quality Productive Forces Revive Rust Belt," China Daily, March 11, 2024, https://www.chinadaily.com.cn/a/202403/11/WS65ee5c71a31082fc043bbcd0.html.
2. "Xi Stresses Striving for Full Revitalization of Northeast China," Xinhua, September 10, 2023, https://english.news.cn/20230910/389cbdb1029d49a0991adfda8006607c/c.html.
3. Xi Jinping, Report to the 20th National Congress of the Communist Party of China, October 16, 2022, https://www.mfa.gov.cn/eng/zxxx_662805/202210/t20221025_10791908.html.
4. Feng Luo et al., "Assessing the Total Factor Productivity Growth Decomposition: The Transformation of Economic Growth Momentum and Policy Choice in China," Environmental Science and Pollution Research International 30, no. 12 (December 14, 2022): 34503–17, https://doi.org/10.1007/s11356-022-24282-0.
5. Michael Pettis, "China's Economy Needs Institutional Reform Rather Than Additional Capital Deepening," Carnegie Endowment for International Peace, July 24, 2020, https://carnegieendowment.org/chinafinancialmarkets/82362; Diego A. Cerdeiro and Cian Ruane, "China's Declining Business Dynamism," International Monetary Fund, February 18, 2022, https://www.imf.org/en/Publications/WP/Issues/2022/02/18/China-s-Declining-Business-Dynamism-513157.
6. "New Quality Productive Forces Crucial to China's Economic Landscape," Xinhua, March 6, 2024, https://english.news.cn/20240306/86206333915f44159e184fe8bf36be5b/c.html.
7. "Xictionary: New Quality Productive Forces," Xinhua, March 6, 2024, https://english.news.cn/20240306/a2905236963f4b00adae5e8b1b6c2c2f/c.html.
8. Shengzhou Ye, "EU Strategic Autonomy: Easier Said Than Done," ThinkChina, May 12, 2023, https://www.thinkchina.sg/eu-strategic-autonomy-easier-said-done.
9. Jiawen Zhang and Yuxuan Jia, "Zhang Jun Advocates for Household Income Focus, Discourages Infrastructure Over-Investment," The East Is Read, March 22, 2024, https://www.eastisread.com/p/zhang-jun-advocates-for-household.
Please note: The above contents only represent the views of the author, and do not necessarily represent the views or positions of Taihe Institute.
This article is from the April issue of TI Observer (TIO), which focuses on the concept of "new quality productive forces" and tries to interpret its theoretical grounds and strategic importance. If you are interested in knowing more about the April issue, please click here:
http://www.taiheinstitute.org/UpLoadFile/files/2024/4/29/1720023057288b81-e.pdf
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