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China’s economic transformation and upgrading picks up speed

Author  :  Mao Li     Source  :    Chinese Social Sciences Today     2018-08-31

China’s unicorn Xiaomi held a booth at the Mobile World Congress (MWC) 2018 in Barcelona earlier this year. Xiaomi produces and invests in smartphones, mobile apps and other electronics. Photo: FILE

According to data recently released by the National Bureau of Statistics, in the first half of 2018, the value added of China’s high-tech, equipment manufacturing and strategic emerging industries increased by 11.6 percent, 9.2 percent and 8.7 percent respectively, which is significantly faster than the growth rate of the total value added of industrial enterprises above designated size (having an annual revenue of 20 million yuan or more, about three million US dollars).

Shi Guang, an associate research fellow at the Development Research Center of the State Council, said that traditional industries are characterized by large scale, stable demand, strong ability to withstand volatility and a large number of employees, all of which are crucial for steady growth. Enhancing technological innovation and efficiency in traditional industries is of great significance for facilitating economic transformation. In light of strengthening supply-side structural reform, the national manufacturing innovation system has been accelerated along with industrial restructuring and integration, and the concentration and modernization levels of enterprises have been further improved.

The rise of unicorn companies has recently become a hot topic in China’s economic field. A unicorn generally refers to a startup company valued at over one billion dollars. According to the China-US unicorn research report released by Deloitte last year, half of the world’s top ten unicorn companies are Chinese.

The enormous national economy and its strong internet infrastructure fulfill the prerequisites for the rapid expansion of Chinese internet companies, said Song Lei, a professor from the School of Government at Peking University.

At present, many of the Chinese companies listed in the world’s top 500 are non-manufacturing enterprises that rely on the internet. This shows that other Chinese unicorn companies with the same characteristics have the prospect of growing into world-class ones, Song continued.

Behind the proliferation of unicorns is a grand picture of the rapid increase in China’s new economic momentum. Liu Zhe, deputy director of the WANB Institute, analyzed the new Chinese economy in regard to soft industry and soft manufacturing. A soft industry is one that focuses on soft input and meets people’s spiritual needs, including the knowledge industry, the cultural and entertainment industry, the information industry, the financial industry and other service industries, Liu said.

Soft manufacturing refers to the manufacturing model in which soft input accounts for more than 50 percent of the total value of products, mainly aiming to satisfy soft demand, Liu said. As of 2017, soft industry and soft manufacturing with high brand and technology values accounted for 40 percent of all industries in China. “Soft industry and soft manufacturing are not only growing rapidly, but also sustainable. They can form a hedge against the downward pressure of traditional industries and become the driving force for China’s economic transformation and upgrading.”

In the face of an extremely complicated domestic and international environment, the Chinese economy is able to maintain resilience and vitality due to three factors, said Zheng Yujie, head of the Research and Information Development Department at the China Development Institute. First, under the new challenges of opening up and market competition, China has made good use of the political advantages of the socialist system to concentrate resources and accomplish large undertakings. In some basic technology areas, even more efficient R&D and application can be achieved by integrating strengths.

Furthermore, China’s enormous human capital dividend continues to take effect. China’s economy is moving towards high-quality growth, which requires less support from natural resources as in the past to more support from human capital. China’s higher education expansion has reserved much talent.

In addition, its huge market size has become China’s main source of economic competitiveness. China’s middle-income group has ranked first in the world and continues to grow. Great and diverse consumer demand provides a fertile ground for the transformation and application of technological inventions, Zheng said.

To accelerate the shift from old economic drivers to new ones, the key is to continue to comprehensively deepen the reform, Zheng said, adding that fiscal and taxation system reform is of particular significance.

(edited by JIANG HONG)

Editor: Li Yujie

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