The Resolution of the Central Committee of the Communist Party of China on the Major Achievements and Historical Experience of the Party over the Past Century adopted at the sixth plenary session of the 19th CPC Central Committee pointed out that “We need to ground our work in this new stage of development, apply the new development philosophy, foster a new pattern of development, and promote high-quality development.”

In the new era, China’s economic development goals need to shift from scale expansion to improving quality and efficiency. Development’s motive force needs to shift from factors of production to innovation. Meanwhile, China’s development focus needs to transform from quantitative increases and capacity expansions to an emphasis on both stock adjustments and optimized increments in a transformed economic structure. The economy also needs to advance towards a more favorable position in the division of labor and a better economic structure.

The CPC Central Committee stressed that implementing the new development philosophy is a fundamental transformation that concerns China’s comprehensive development. We can no longer simply use GDP growth rates to determine who the heroes are. Instead, we must pursue innovation-driven, coordinated, green, open, and high-quality development for all, while carrying out a transformation in the economy’s quality, efficiency, and momentum.

Innovation-driven

As China’s economic development stages spiral upward, production factors have begun to play a much weaker role in driving the economy, while the traditional competitive advantage gradually fades, and extensive development models are unsustainable. This is when the new development stage requires a new driving force—innovation.

Innovation fuels economic growth. When fused with the real economy, innovation elements featuring original innovation, basic research, and applied research will help reform the institutional mechanism, stimulate economic entities, and boost the contribution rate of technological progress. They will also accelerate the process of applying scientific and technological achievements, and reform research and development institutions. Moreover, they will help develop advanced technologies, upgrade enterprise technology, build new platforms, and nurture more high-tech enterprises. By doing so, we can innovate our development path and business model, make our products more internationally competitive, and create new growth poles for the economy.

Innovation also complements other factors. By innovating with land, capital, and labor, we can fuse strategic emerging industries with traditional industries. This will help break traditional factor supply limits, making the supply and demand structure more flexible towards demand changes, while striking a balance between the quality and efficiency of China’s economic development.

Coordination

History taught us that an important measure for the sustainability of an economy is its coordination level. The degree of coordination is also a key criterion to tell whether or not a country can avoid the middle-income trap. As a result of its traditional, extensive development model, China is facing conflicts and imbalances among domestic regions, economic structures, and between its soft and hard power. China is building itself into a modern socialist country in all respects. Coordinated development points a way out of China’s imbalanced and insufficient economic development, while ensuring social harmony and driving high-quality economic development.

First, China is coordinating regional economic development. China continues to carry forward its national strategies, including driving the coordinated development of the Beijing-Tianjin-Hebei region, and the integrated development of the Yangtze River Delta, Guangdong-Hong Kong-Macao Greater Bay Area, and the Chengdu-Chongqing economic circle. China has streamlined deployment of its main functional areas, improved its spatial governance structure, enhanced regional strength, and facilitated the complementary advantages of different regions in the country.

Second, China is promoting urban-rural integrated development. Striving to build rural areas with thriving businesses, pleasant living environments, social etiquette and civility, effective governance, and prosperity, the country is carrying out its rural vitalization strategy, speeding up rural and agricultural modernization, and promoting coordinated rural and urban development in many respects.

Third, China is optimizing its economic development structure. China has implemented the socialist market economy, deepened mixed ownership reform, improved market-oriented allocation of factors of production, worked on building the modern economy, broken the barriers of rigid systems and mechanisms, made up for weakness in the market, and addressed the structural imbalances in the real economy.

Finally, China is balancing both material and cultural-ethical progress. Some regions’ practices of “putting the GDP first” have been averted. In addition, the country has maintained confidence in the path, theory, system, and culture of socialism with Chinese characteristics.

Green development

Restrained by the solidification of the global industrial pattern and domestic production technologies, deep-rooted problems such as “massive input, high consumption, and heavy pollution” in China’s industrial structures have not been eradicated. Facing the reality of tightening resource constraints, increasing pressures from environmental pollution, and severe challenges to eco-systems, China must avoid the middle-income trap and the dilemma that ecological progress lags behind economic growth. It was under ecological resource carrying capacity constraints that the idea of green development was proposed as a sustainable development concept. Green development not only complies with the path towards a low-carbon economy, and circular development, but also makes a precise summary and forward-looking guidance for sustainable development in the future. Green development should include the following four policy elements.

Policymakers should adher to the concept of humanistic harmony. We should adhere to the basic national policy of environmental protection, abandon “anthropocentric” development concepts, follow the laws of nature, make rational use of resources, coordinate the relationship between man and nature, and promote healthy interactions between society, the economy, and ecological environments, to solve the contradiction between man and nature, take into account inter-generational interests, and build a new pattern of resource-saving and environmentally-friendly development.

Policymakers should follow a path of low-carbon and circular development. Focusing on the national goal of carbon peaking by 2030, we should study the consultation mechanism and coordinated governance path to meet the targets carbon peaking and carbon neutrality, improve the linkage mechanism to respond to air pollution, climate change, and coordinate adjustments in low-carbon technology innovation and green infrastructure.

Policymakers should optimize function zoning. We should follow the positioning of the functional zones, optimize the pattern of territorial space, integrate multiple plans for the functional zones and other kinds of spatial planning. This will leverage the basic role of the functional zones on land development, spatial development, and conservation, comprehensively construct the coordinated pattern of urban and rural development and ecological security, and realize more intensive production spaces, habitable living spaces and green ecological spaces.

Policymakers should improve ecological and environmental governance. Centering on ecological quality, we will improve the environmental protection system by promoting a shared environmental governance system among the government, enterprises and the public. These actions will prevent and control pollution in water, air, and soil, while addressing prominent environmental issues that harm public health, and comprehensively restoring the regulatory functions of the natural ecosystem.

Opening up

The law of capital movement shows that globalization is the inevitable result of developing productive forces and enhancing efficiencies.

Domestically speaking, China has formed a multi-resource endowment structure. Yet it still needs to tap into the potential of foreign capital. We need to absorb foreign investment and advanced factors, accumulate more development factors, increase the efficiency of market resource allocation, expand trade scale, and deepen the division of labor.

Meanwhile, we need to pursue coordinated development among economic circles. We also need to link districts together and turn them into a unified, open market.

Internationally, China needs to address the issue of diminishing competitive advantage of pricing, and change economic behaviors that are unsustainable in our trade system. We need to cement our traditional advantages in foreign trade, and develop a higher-level open economy. We need to invest more into the international market, build transformation and upgrading bases, trade facilitation platforms, and an international marketing system. We need to leverage our competitive edge, increase the concentration ratio of international market goods, and build a community of shared interests. In addition, China should make its voice heard in the G20 Group, APEC, BRICS, and so forth. We should take part in international economic governance and assist with provision of public goods. It is also important for us to enhance our power of discourse in global economic governance.

Shared benefits

The concept of sharing is an ethical norm resulting from specific social development practices, and it aims to correct harmful social development, reduce poverty, and combine driving forces for high quality economic development. This concept can be upheld by the following four policy interventions.

First, uphold fairness and justice. Sharing does not only mean distributing material wealth in a fair manner, but also rights and opportunities for development must be shared equitably.

Second, narrow the income gap. This isn’t equalitarianism, but seeks to rigorously control the income gap. After eliminating absolute poverty, China still needs to narrow the income gap between urban and rural areas, different regions and social groups, regulate the participation of multiple elements in the primary distribution mechanism, and improve the redistribution adjustment mechanism mainly through taxation, social security, and transfer payments. We should optimize the distribution pattern for national revenue, and build an oval-shaped income pattern in conformity with shared development, thus ensuring that the gains of development benefit all our people in a fair way.

Third, guarantee public services. Due to historical constraints in development, there has been imbalanced development and distribution among different regions and also between rural and urban areas. We need to further increase transfer payments from the exchequer, to subsidize poor areas and groups, provide complete fundamental public services for all, and ensure all people’s practical interests.

Finally, we must realize common prosperity. Development of a socialist economy is definitely not for the benefit of a few, but for finally achieving common prosperity on the basis of unleashing and developing productive forces.

Huang Qinghua is a professor from the College of Economics and Management at Southwest University and Zhou Mi is from Chongqing Rural Commercial Bank Co., Ltd.