Scientific Development Is Essential for China’s Continued Development

From: English Edition of Qiushi Journal Updated: 2013-05-28 18:51
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Research Center for the Theories of Socialism with Chinese Characteristics of the Chinese Academy of Social Sciences

The report to the Eighteenth National Congress of the CPC presented a comprehensive summary of China’s basic experiences in socialist modernization. In a demonstration of great foresight, the report stated that in contemporary China, pursuing scientific development best embodies the idea that only development counts. Fully revealing the value of the Scientific Outlook on Development as a theory, this important statement has pointed the way towards a new era of scientific development for China’s economy. 

I. Development is the “master key” to resolving all problems in China

Development, and in particular economic development, has a decisive bearing on the promotion of socialist modernization. For this reason, development has always been a core issue in the building of socialism with Chinese characteristics. Prior to the founding of the People’s Republic, China was a weak and impoverished country, suffering humiliation at the hands of foreign powers. An important reason for this was our backward economic development. The founding of a new, socialist China laid down the institutional foundations for China to pursue economic development, opening the door to the country’s modernization.

A technician performs maintenance on a pump jack located within an area of forest in the Daqing Oilfield. Since the launch of the reform and opening up drive, and particularly since the year 2000, a number of resource-based cities in China have decreased their heavy reliance on coal, oil, and other national resources through major efforts to develop new growth sectors and upgrade their resource industries. This has helped these cities to find new impetus for sustainable development./ Photo by Xinhua reporter Han Yuqing

During the first 30 years of the People’s Republic, China concentrated its efforts on promoting industrialization by relying on its planned economic system. It was not long before the country had succeeded in establishing a relatively complete national economic system. During this period, a wealth of important experience was gained with regard to carrying out socialist construction in a large, Eastern country with extremely underdeveloped productive forces. With the launch of the reform and opening up drive, the CPC, having made conscientious efforts to learn from the experiences and lessons of the past, promptly shifted the focus of the Party and country towards economic development, thus opening a new chapter of reform, opening up, and modernization. During more than 30 years of reform and opening up, China has established a socialist market economy, which has allowed it to unleash the massive enthusiasm and creativity of its people as producers, and successfully make the historic transformation into a major economy. China’s economic development has made huge and historic contributions to the progress of human civilization.

Today, development continues to be the key to resolving all of China’s problems. Objectively speaking, though China is a major economy, it is yet to become an economic power; and despite having achieved moderate prosperity in general, our people are not yet affluent. At present, China’s GDP per capita is not only much lower than that of developed countries, but even lags behind that of many developing countries. According to UNDP (United Nations Development Programme) estimates of GNI per capita in PPP terms (constant 2005 international USD), China’s GNI per capita was only US$7,476 in 2011, equating to just 60.9% of the minimum total needed for classification as a high-income country. Moreover, this figure is equal to approximately 17.4% of the total for the US, and 26.5% of the total for the Republic of Korea (ROK). Domestically speaking, China’s employment situation leaves no room for optimism, the income gap remains overly large, and a large number of people are still living in poverty. In order to resolve these problems and issues, not only must we do a better job of dividing the “pie” that we already have, but more importantly, we must ensure that the “pie” gets bigger by increasing the pace of economic development.

II. Scientific development is the key to determining the future of China’s development

Development is a process of constantly exposing and resolving problems. Having condensed a process that took developed countries several centuries to complete into the space of mere decades, China has experienced a concentrated outburst of environmental problems and resource constraints during the course of its economic development. In particular, the fallout from the international financial crisis has China forced to rebalance the relationship between short-term growth and long-term development, leaving the country with much less room to maneuver when resolving the structural problems present in its economy. Taking various factors into consideration, we can see that China’s economic development is facing more daunting challenges now than it ever has done before. Under such circumstances, the question of whether or not China can achieve scientific development has become crucial to determining the future of the country’s development.

Firstly, insufficient capacity and impetus for independent innovation has become a bottleneck that is constraining China’s economic development. The material and non-material pursuits of the Chinese people have become increasingly diverse since China entered the higher-end of the middle-income stage. This means that China’s development can no longer simply be about the growth of the GDP, but needs to be a more scientific form of development that emphasizes speed, quality, and efficiency. For a long period of time, China has relied primarily on the input of factors of production to stimulate economic growth. This approach has proven successful in creating large amounts of material wealth and bringing about huge improvements to standards of living. However, as this growth model is based around extensive expansion, it becomes irrational and ultimately unsustainable once changes have taken place to the quality and quantity of factors of production and to the structure of market demand. The main problems that China is encountering in economic development at present all stem from the fact that this traditional growth model is still playing a dominant role in the economy. As a result, the net social benefits of economic activities are on the decline, and further economic development is being hindered by our insufficient capacity and impetus for independent innovation.

Secondly, it is becoming difficult to underpin China’s economic growth simply by relying on the strategy of exchanging markets for technology. Looking at China’s economic development over the past three decades or so, it is fairly obvious that the practice of increasing productive forces by exchanging markets for technology was a feasible approach to take during the economic take-off stage. It was by adopting this strategy that we were able to meet the demands of our enterprises for new technologies and new equipment within a short period of time, and allow the capacity of Chinese manufacturing to increase rapidly. However, to a certain extent, this strategy has also had the effect of undermining our capacity for independent innovation. As a result, the vast majority of Chinese enterprises lack their own core technologies, independent intellectual property rights, and world-famous brands, and China has become the “world’s factory” as a producer of low-end goods. Given that China is now the second largest economy in the world, there is almost zero possibility that the country can continue relying mainly on foreign technology to underpin its long-term growth. The traditional approach of exchanging markets for technology is becoming less and less viable.

Thirdly, China’s heavy reliance on investment to promote economic growth is being seriously constrained by the need to conserve resources, protect environments, and raise economic efficiency. Given the enormous scale of China’s market, the enterprises as microeconomic entities are able to weather market competition even if they do not have the capacity for independent innovation, provided that they maintain a certain level of investment and production. This explains why enterprises have such a strong desire to invest. On the other hand, owing to China’s long-term overemphasis on GDP growth, local governments are desperate to invest, seeing investment as a means of improving their standing in performance appraisals. The combination of these impulses to invest is responsible for China’s high investment rate. Though high investment has fuelled China’s rapid economic growth, it is now increasingly giving rise to serious economic consequences, which are most directly manifested in our low investment efficiency and decreasing environmental capacity. In addition, high investment has also caused China’s capital-labor ratio to rise too soon and too rapidly. To some extent, labor costs have risen overly quickly, causing China to lose its comparative advantage in economic development at an increased rate. With the continued growth of the Chinese economy, major changes have taken place to the state of factors of production such as capital, land, and labor, and as a result, it is becoming increasingly difficult to achieve rapid growth by merely increasing investment.

III. Adhering to the path of scientific development

China’s economic development has come under downward pressure in recent years owing to the straining influence of the international financial crisis. But from a long-term perspective, however, the country is still in the midst of an upward cycle. As long as China is able to switch to a scientific path of development in which economic development is founded on endogenous growth, there is every chance that China’s rapid economic development will be able to go on for another 20 years, or even longer. 

1. We must accelerate the transformation of our economic growth model. The fundamental purpose of accelerating the transformation of our economic growth model is to rapidly put an end to the extensive economic growth we are seeing now and achieve intensive economic growth that is driven by independent innovation. As there is significant downward pressure on our economic growth at present, the primary task in accelerating the transformation of the economic growth model at present must be to stabilize economic growth. Taking the restructuring of the economy as the focus of our work, we must continue to rely on advances and innovations in science and technology as a foundation, make ensuring the people’s wellbeing and improving living standards the starting point and goal of our efforts, identify the development of a resource-conserving and environmentally friendly society an important focus, and continue to take advantage of reform and opening up as a strong impetus for development. Through our efforts, we must strive to promote a rapid shift towards endogenous, independent, sustainable, and efficient economic growth, and strike a sound balance between speed, structure, quality, and efficiency.

2. We must adjust and optimize the economic structure at the strategic level. Our efforts to adjust and optimize the economic structure need to be focused on three aspects: demand structure, industrial structure, and the urban-rural and regional structure. The first is demand structure. While maintaining an appropriate level of investment and exports, we must work faster to improve various policies on stimulating consumption and increasing personal income, so as to make consumption a greater contributor to economic development. The second is industrial structure. On the basis of strengthening the position of agriculture as the foundation of the economy and promoting agricultural modernization, we must strive to further integrate the processes of industrialization and IT application, make constant efforts to enhance the core competitiveness of manufacturing industries through the development of modern service industries, and promote the transition towards economic development that is driven through a sound combination of primary, secondary and tertiary industries. The third is urban-rural and regional structure. We need to promote the development of a new countryside and balanced development between regions through urbanization. In addition to optimizing and upgrading the city clusters in eastern coastal regions and enhancing the coordinated development of their industries, we need to foster and develop a number of city clusters and modern industrial belts in parts of central and western China where resources are plentiful and the environmental capacity is strong, thereby creating sound growth momentum that extends from east to west in cascade fashion.

3. We must lay an emphasis on independent innovation as our strategic core. In recent years, China has made unremitting efforts to promote the transformation of its economic growth model. Though we have made a certain degree of progress, the overall results have not been ideal. The main reason for this has been our lack of independent innovation, which poses a major barrier to our economic transformation and restructuring. In order to enhance our capacity for independent innovation, we need to step up our investment in independent innovation. Giving priority to basic research, research in cutting-edge technologies, public benefit-oriented research, and original innovation activities, we must strive to make breakthroughs in key technologies and remove the constraints that are inhibiting our economic and social development. In addition, we also need to focus on deepening the reform of the systems we employ to administer science and technology activities, and step up efforts to establish a market-oriented framework for technological innovation in which enterprises play the dominant role and collaboration takes place between enterprises, universities, and research institutes. By doing so, we will be able to encourage the concentration of innovation factors in enterprises, and provide impetus for the application of scientific and technological research results in actual production. At the same time, we need to strive to create a social atmosphere in which innovation is encouraged, and stimulate the creative wisdom and enthusiasm of our entire society to the greatest possible extent, thereby providing a strong intellectual foundation to underpin China’s economic development.

4. We must balance the relationship between the market and the government. The key to achieving development that is sound, rapid, and scientific is to balance the relationship between the market and the government and establish institutions and mechanisms that are conducive to scientific development. After over 30 years of reform and opening up, the vast majority of industries in China now have the capacity for endogenous growth. At the same time, our market has become increasingly mature, with market forces playing a basic role in allocating resources. As long as we follow market principles when we are formulating economic policies, we will be able to rely on market competition to bring about the most favorable allocation of innovative resources. In turn, this will allow enterprises and individuals to become inexhaustible sources of innovation, culminating in a huge driving force that will fuel our scientific development. In order to promote scientific development through market forces, we need to continue to deepen reforms in key areas and crucial links, and accelerate government reform and the transformation of the role that the government plays, so that instead of directly controlling resources, engaging in investment, and intervening in microeconomic activities, the government serves to guide the innovation activities of various market entities through macro regulatory policies. By doing so, not only will we be able to give play to the role of market forces in stimulating the innovation activities of microeconomic entities, but we will also be able to exert the role of government policies in guiding major technological innovations and removing the constrains on our economic development. Only this way will we be able to embark on a path of scientific development that is geared to China’s national conditions. 

(Originally appeared in Qiushi Journal, Chinese edition, No.24, 2012)

Note:  This article is written by Hu Jiayong and Wang Zhaobin. 

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