According to the 20th CPC National Congress report, “pursuing high-quality development as our overarching task, we will make sure that our implementation of the strategy to expand domestic demand is integrated with our efforts to deepen supply-side structural reform. We will boost the dynamism and reliability of the domestic economy while engaging at a higher level with the global economy.”

The supply-demand relationship is the most fundamental relationship in the market. Fostering a new development pattern requires expanding domestic demand as a strategic basis point, using supply-side structural reform as the main thread, forming a dynamic balance at a higher level where the demand pulls the supply and the supply creates the demand to achieve equilibrium. These interventions will promote the orderly flow and highly efficient operation of the national economy, thus leading to higher quality, more sustainable development.

Expanding domestic demand

Expanding domestic demand is required to satiate people’s need for a better life. We should constantly expand effective demand, strengthening the force of an effective demand pull on effective supply. Consumption is the final demand, which represents a lasting pulling force for sustainable economic growth, and is a key driving force that smoothens key domestic flow. To thoroughly implement the strategy of expanding domestic demand we should activate demand-pulled economic growth effects, meet people’s individual, diversified, and upgraded consumption demands, increase the high-quality market-oriented supply, consistently release the enormous consumption potential, and ensure that the enlargement of domestic flow has demand underpinnings. For this reason, consumers’ willingness to consume should be encouraged. Furthermore, the capability to consume should be enhanced, specifically by increasing consumers’ incomes. In addition, sustainable income growth mechanisms for the people, commensurate with their upgraded consumption levels, should be explored and established. Income levels of low-income groups should also be constantly increased, and middle-income groups should be constantly expanded, to finally form a domestic demand-oriented growth system.

Supply-side structural reform

The structural dislocation of supply and demand is an important reason for impeded economic circulation. The supply-side flow is a key component of economic circulation. To unblock domestic circulation, supply-side structural reform should be prioritized, to allow new supplies to lead and create new demand, to achieve a higher level of dynamic mutual adaptation of supply and demand, and to continuously enhance the intrinsic driving forces and reliability of domestic circulation.

First, the supply quality and efficiency should be constantly improved through reform, to promote a sustainable consumption upgrade. The construction of a unified national market should be accelerated and institutional barriers should be broken, to accelerate the cultivation of a unified and open market system through orderly competition. We should work to see that the market plays the decisive role in resource allocation and that the government better serves its role, from both the production and the supply side. Constantly upgrading the industrial structure, enhancing the supply system’s resilience, while increasing quality can enhance the supply system’s dynamic adaptability to domestic demands.

Second, the driving force of innovation should be activated and businesses’ independent capacity for innovation should be constantly improved. This will promote more high-quality, efficient supplies. It is advisable to actively promote the development of key core technologies, improve independent innovation capacities, establish safe, stable, and reliable industrial supply chains, and enhance high-end supply capacity. A new economy should be developed based on new technologies, new industries, new forms, and new models, to accelerate new growth points, develop the digital economy, and other strategic emerging industries.

High-level opening up

Confronted with new trends and challenges, we should promote opening up of a wider range and at a higher level. Domestic and international circulation should reinforce each other, so as to provide strong driving forces to foster a new development pattern.

Boosting the dynamism and reliability of the domestic economy aims to better connect domestic and international markets, make better use of both domestic and international resources, and improve the quality and level of international circulation. Tapping into the strong potential of domestic demand is crucial to achieving sustainable development. China has a large-scale market and a complete industrial system. As such, it should accelerate the construction of a strong and resilient national economic circulation system to continuously enhance the Chinese market’s international competitiveness. Meanwhile, active participation in international economic circulation will help improve the efficiency and level of internal circulation, and promote a higher level of dynamic economic balance.

It is therefore necessary to optimize distribution of the international market by expanding exports, to realize high-quality “bringing in” and “going global” on higher levels, and to effectively align domestic and international rules, gradually shifting from opening up based on the flow of goods and production factors to institutional opening up, attracting more high-end international resources and production factors, and promoting high-quality international exchanges and cooperation. Exploring reform and innovation by facilitating trade and investment is required to accelerate institutional innovation.

Wang Tinghui is president of the Guangdong Academy of Social Sciences, and Li Na is from the School of Economics and Trade at the Guangdong University of Foreign Studies.