New economic model set to boost strength

Smooth transition in growth engines, people-centered policies highlighted

BEIJING, July 25, 2024 /PRNewswire/ -- A news report from chinadaily.com.cn:

China will likely pursue a new economic model to drive a smooth transition in growth engines, potentially providing an alternative solution to the global challenge of low productivity growth, according to leading economists and executives.

They said this approach features a greater play of market forces in resource allocation and technological innovation, but differs from the Western free-market paradigm, as it upholds a people-centered policy orientation and underlines top-level government design.

By implementing the model, China could achieve around 5 percent annual economic growth over the coming five years, they said, with first-half growth results having shown that the country is positioned to navigate the property market correction and increased external uncertainties as new growth drivers flourish.

"I think this is really very unique, what I will call the China model or China economic model," said Zhu Min, former deputy managing director of the International Monetary Fund and former deputy governor of the People's Bank of China, the country's central bank.

In an exclusive interview with China Daily, Zhu said that China has made it clear that it would build a future model for the nation's economic development by establishing a high-standard socialist market system with Chinese characteristics.

The resolution adopted at the third plenary session of the 20th Central Committee of the Communist Party of China has set the goal that by 2035, China will have finished building a high-standard socialist market economy in all respects.

Based on the resolution, China's economic model will feature market forces playing the pivotal and most important role, while reforms pushing technological advances, strengthening local government finances and improving people's incomes and welfare will also serve as critical pillars, Zhu said.

"I think those are very important messages and policies for China today and for China moving into the future," said the renowned economist, as these messages respond to worldwide discussions about what defines the economic development model that underpins China's growth miracle.

Zhu said that the model features two pivotal changes: giving more authority and space to companies as the base units at the forefront of driving technological innovation, and increasing local governments' revenue, equipping them with many more resources and responsibilities. By granting more authority and freedom to enterprises and local authorities, rather than concentrating the power at the central level, the changes will bring more economic activity and strength, reflecting a market-based reform approach, Zhu said.

Zhu added that further opening-up will remain a crucial growth engine for China, citing the importance of welcoming more foreign capital into China and encouraging Chinese companies to make overseas investments and transfer advanced technologies across the border.

Liu Qiao, dean and a professor of finance at Peking University's Guanghua School of Management, said the plenum mapped out China's unique path to achieve modernization and can provide a new solution to the global challenge of low productivity growth.

Liu said that China's modernization approach combines the role of bottom-up market forces with the government's top-level design to effectively mobilize resources to confront the most critical problems the nation faces in development, which makes it different from the free market paradigm prevalent in Western economies.

With the plenum outlining further market-oriented reform, Liu said China is very likely to see a recovery in productivity growth and achieve about 5 percent economic growth over the next five years. That would set the stage for doubling China's GDP per capita from its 2020 level of 71,828 yuan ($9,890) by 2035 and basically achieving modernization.

In the first half of the year, China's economy expanded 5 percent year-on-year, in line with the annual growth target, compared with 5.2 percent growth in 2023, the National Bureau of Statistics said.

Zhu, the former IMF official, said, "I think the first-half 5 percent GDP growth and last year's growth show that China is in a position to manage the transition (in growth drivers) in a smooth way."

He emphasized that China's manufacturing sector has grown in international competitiveness, which explains the global popularity of Chinese electric vehicles. This success is not due to so-called subsidies or dumping, the allegations of which are false, Zhu said.

Acknowledging the strength of China's manufacturing capacity, Julian MacCormac, regional director of Rolls-Royce Greater China, said China "has been and is an important part" of the supply chain of the British giant in power and propulsion solutions.

Anu Rathninde, president of Johnson Controls Asia-Pacific, hailed China's ongoing efforts to deepen reform and expand opening-up, saying, "As China's economy grows, the foreign enterprises grow and benefit equally."

Rathninde said China is one of the most important markets for the United States-based smart building solutions provider, and the company will continue to expand its manufacturing and R&D capabilities in China.