Consumption upgrade boosts new productive forces

In the pursuit of economic growth, enhancing productivity is of crucial importance. New productive forces, grounded in cutting-edge technologies and emerging industries, serve as a novel force driving output. The development of such productivity is driven not only by the intrinsic demand for China's economic transformation and high-quality development but also from the external pressures due to the fast-changing global economic landscape.

To harness new productive forces, therefore, we need a synergistic alignment with the evolving needs of the people to foster a virtuous cycle of supply and demand.

It is important to assert here that new productive forces are the organic integration of new technologies, pathways and industries.

New Technologies: Productivity growth primarily hinges on innovations in technology, akin to the transformative impacts witnessed during past technological revolutions in the West. The digital and green revolutions have been rapidly unfolding, ushering in a plethora of general-purpose technologies, epitomized by innovative products such as ChatGPT.

China has already gained an advantage in these revolutions, laying a solid foundation for the Fourth Industrial Revolution and new productive forces.

New Pathways: Since the launch of reform and opening-up, China has gained knowledge of and developed advanced technologies, following the path of "introduction, digestion, absorption and re-innovation" to catch up with the Western developed economies. However, since leading-edge technologies in Western countries are often intrinsic to their resource endowments, not necessarily compatible with China's comparative advantages, the difficulty in surpassing them following the same path is considerable. Hence, it is necessary to integrate China's unique characteristics and forge new advantages and paths in technological development, facilitating a strategic big leap forward.

The United States' leap ahead of Germany in the chemical industry — transitioning from coal-based to oil-based processes — and its strategic pivot from chemical to biomedicine in the medical field is a vivid illustration of its astute lane-changing strategy.

New Industries: New industries are carriers of new productive forces, embodying the commercial realization of new technologies and pathways. As technologies mature and develop large-scale production capability, strategic emerging industries are formed. These industries are characterized by knowledge-intensive operations, minimal resource consumption, substantial growth potential and potential positive benefits. Strategic emerging industries can lead to a harmonized integration with new labor forces, new capital, new infrastructure, new organizational structures and new governance models.

To develop new productive forces, it's also crucial to align with the evolving demands of the people, because that creates a dynamic, positive and efficient growth path where demand drives supply and supply stimulates demand.

As China's per capita income continues to increase, consumer preferences are changing, as reflected in the rising demand for better, world-class products and services. With their focus shifting from having enough goods for basic sustenance, consumers are now seeking much better quality and a wider variety of goods and services. This transition extends beyond material goods, with a gradual shift from demand for tangible products to a pursuit of service-oriented offerings in areas such as culture, eldercare, healthcare and finance.

To effectively boost new productive forces, it is imperative to respond to the escalating demands of the people. In domains witnessing rapid growth in consumer demand, new technologies must be harnessed to form innovative industries, with the upgraded consumer needs driving new productive forces.

China's unique market advantages — marked by its vast scale, diverse supply and demand regime, innovations and robust driving force — provide an ideal experimental ground for various new technologies, formats and models to hasten the industrialization process.

By tapping into the huge Chinese market, the diverse supply and demand structure and dynamic innovation process, numerous local innovative companies that succeeded in the Chinese market have emerged as global leaders. Reforms, continuously unleashing the domestic potential demand, leveraging China's market advantages and integrating technological innovation resources through consumer upgrading, are the crucial pathways for the development of new productive forces.

Simultaneously, the development of new productive forces serves as a key means of upgrading consumption and enhancing the well-being of the people. The emergence of new productivity not only fuels economic growth but also increases wages and household incomes, ensuring continuous consumption upgrading, and thus building a virtuous cycle of "high output, high income, high consumption and high welfare".

Moreover, the alignment of new production generated by new productive forces with new consumption coming from consumption upgrading helps keep the balance between supply and demand, and thus maintains price stability and ensures the stability of financial markets and monetary policies — laying the foundation for China's long-term stable growth.

As far as policy is concerned, there is a need to further optimize the policy framework supporting new productive forces. This involves enhancing the efficient, collaborative and open system of promoting innovations, emphasizing the role of market mechanisms and entities, and facilitating positive interactions between demand-driven innovation and innovation-driven demand. It is also necessary to fine-tune the allocation of innovation resources and establish a dynamic technology governance system through multi-entity collaborative partnerships.

There is a need to improve financial, tax and industrial policies, too, which support innovation and foster the deep integration of talent, innovation, industry and capital chains. And building a favorable environment and micro-ecosystem for promoting innovations and entrepreneurship is necessary to increase input in science and technology R&D, improve financial technology, and refine mechanisms for the transformation of technological achievements.

Furthermore, following digitization and the rule of law and expediting the construction of a unified national market are also necessary to expand the demand for new productive forces.

The author is head of the Economics and Management School, Wuhan University. The views don't necessarily represent those of China Daily.