Innovation is vital for China to facilitate economic transformation and upgrading during the 14th Five-Year Plan (2021–2025) period.

From a domestic perspective, breaking through economic development bottlenecks and solving deep-seated contradictions and problems must rely on innovation; from an international perspective, seizing catch-up opportunities brought by the new industrial revolution also requires innovation, said Huang Qunhui, director of the Institute of Economics at the Chinese Academy of Social Sciences (CASS).

Xie Fuji, a professor at the Antai College of Economics and Management at Shanghai Jiao Tong University, noted that innovation has become the main engine for harmonious development of China’s economic, social, and ecological progress.

The 14th Five-Year Plan period will be a critical period for China to transform its economic development mode and upgrade its industrial structure, Xie said. The lack of key core technologies, however, has become a major constraint to achieving high-quality development.

China has entered a new stage of development, and economic development can no longer rely on the low-cost advantages of labor, resources, and environment, said Zhan Xinyu, a professor from the School of Public Finance and Taxation at Zhongnan University of Economics and Law. China’s science and technology have gradually developed from following, to running in parallel, and even leading some fields. In this new stage, it is urgent to strengthen basic research, and overcome technical problems and development bottlenecks in key areas.

Xie said that during the 14th Five-Year Plan period, the huge domestic market can provide sufficient impetus for technological progress, and strong institutional advantages and macro-coordination capabilities can ensure investment in R&D and industrialization. This will promote the upgrading and optimization of industrial structures and high-quality economic growth.

To facilitate China’s innovation-driven economic development during the 14th Five-Year Plan period, Huang said that it is necessary to deepen supply-side structural reforms and vigorously implement innovation-driven strategies. He suggested establishing innovation-driven mechanisms for industrialization, and promoting high-end industries, thus facilitating a modern economic system with high-quality development driven by innovation.

The digital economy, with the Internet of Things as the core, is the main battlefield for the new round of technological revolution, said He Jun, a research fellow from the Institute of Industrial Economics at CASS. The development of leading technologies in these industries is in an exploratory period, which provides opportunities for China to use the domestic market and the scale of demand to form unique advantages in terms of technological capabilities and technological routes.

Technological innovation is complicated, Huang said. Reform of the technological innovation system and mechanism involves reform of the entire social and economic system. This would include an upgrade of the government management system, currency and financial systems, fiscal and taxation systems, land systems, the system for assessing the caliber of officials, property rights protection systems, and cultural systems.

“The highest imperative for implementing an innovation-driven development strategy is to remove institutional barriers, including reforming technological and related systems, so that enterprises can become the main players of technological innovation, in terms of decision-making, R&D investment, organizing scientific research, and applications,” Huang said.

With improvement of the overall technological capabilities of enterprises, the manufacturing industry has an increasingly strong demand for cutting-edge and precompetitive technologies. However, China still lacks comprehensive national-level institutions for R&D of manufacturing technology. In this regard, He Jun said that it is urgent to build a high-level national institute of industrial technology in accordance with industrial development needs, and evaluate researchers based on their contributions to technological development and industrial development.