Major Issues Concerning China’s Strategies for Mid-to-Long-Term Economic and Social Development
Since the outbreak of the novel coronavirus disease (Covid-19), I have chaired many meetings and issued many instructions on containing the virus and advancing economic and social development. I have also given a lot of thought to the major issues affecting China’s mid-to-long-term economic and social development in light of Covid-19.
The world is undergoing momentous changes not seen in a century. The Covid-19 epidemic, the worst of its kind for a century, is both a crisis and a test. China has now passed the turning point in containing the virus, but globally the virus continues to spread. Given this severe external situation, we must work hard to guard against inbound cases and a domestic resurgence. We must not allow Covid-19 to resurge again. Meanwhile, we should draw inferences, think hard of our current situation in view of China’s long-term development and improve our strategy in order to turn crises into opportunities and achieve high-quality development. Here, I want to talk about several issues, with the focus on development strategies.
First, we must steadfastly pursue the strategy of expanding domestic demand.
Building a complete domestic demand system has a direct bearing on China’s long-term development and stability. Since the adoption of the reform and opening up policy and especially after our entry into the WTO, China has integrated itself into the international economic flow and developed a growth model whereby China serves as the “world’s factory,” while the two ends of the economic process – markets and resources (such as mineral resources) – continue to be located abroad. This has enabled China to seize opportunities in economic globalization to rapidly increase its economic strength and improve its people’s standards of living. In recent years, however, economic globalization has encountered headwinds, and the global spread of Covid-19 may exacerbate the anti-globalization trend as countries become more insular. As such, the external environment for China’s development may change profoundly. Expanding domestic demand is thus necessary to cushion the impact of Covid-19, to sustain our country’s sound economic development, and to meet our people’s growing desire for a better life.
One of the advantages of being a major economy is that we can achieve complete domestic circulation. China has 1.4 billion people and per capita GDP in excess of US$ 10,000, which makes it the world’s biggest consumer market with the greatest potential. Upgrading consumer spending by aligning it with modern technologies and production models can produce great potential for growth. We must regard expanding domestic consumption as the basis of our national development strategy to ensure sound dynamics among production, distribution, exchange, and consumption that are more focused on the domestic market. We must set a strategic course for supply-side structural reform and work toward a dynamic balance between aggregate supply and demand at a higher level. Growing domestic demand and opening up further are not contradictory. The fewer impediments to domestic economic flow, the more global resources will gravitate toward China, the easier it will be for us to develop a new pattern of development that focuses on domestic circulation and features positive interplay between domestic and international economy, and the greater China’s ability to compete and cooperate internationally will be enhanced.
Consumption is a key driver of China’s growth, and the middle-income group is the cornerstone of consumption. At present, our country has around 400 million middle-income earners, the largest in the world in absolute terms. To further expand our middle-income group, we need to introduce policies to optimize the income distribution structure by allowing the market to evaluate and award the contributions of knowledge, technology, management, data, and other factors of production. We should increase investment in human resources to enable more working people to become middle-income earners through their own efforts.
Second, we must improve and stabilize our industrial and supply chains.
Industrial and supply chains must hold at critical moments – this is an essential feature of a major economy. The Covid-19 epidemic is a pressure test under real-life conditions. China’s sound industrial system, strong mobilization and organization capabilities, and exceptional ability to shift the focus of its industrial operations as needed have been important material guarantees in our effective response to the epidemic. Our mask production capacity has increased from 10 million pieces per day at the end of January to 500 million at present. At the same time, the impact of the virus also revealed latent risks in our industrial and supply chains. To safeguard our country’s industrial and national security, we must strive to develop our own industrial and supply chains that are controllable, secure, and reliable and ensure we have an industrial backup system with at least one substitute for each major product and supply channel.
Now, as work and production resume across the country, we should not and cannot simply repeat our past model; rather, we need to reshape our industrial chains by stepping up technological innovation and import substitution across the board. This is crucial to achieving high-quality development and should be a focus in furthering supply-side structural reform. First, we must play to our strengths. We need to consolidate and enhance our international edge in competitive industries; develop technologies that will give us a decisive advantage; continue to strengthen the complete-industrial-chain edge we have in areas such as high-speed rail, electric power equipment, new energy, and communications equipment; improve industrial quality; and deepen China’s involvement in global industrial chains. By doing so, we will develop effective deterrent against attempts by other countries to sever our supply chains. Second, we must shore up our weaknesses. We must build homegrown, controllable, secure, and reliable domestic production and supply chains in areas and links vital to our national security, so that they are self-sufficient at critical moments. This will ensure the economy functions normally in extreme circumstances.
China has the world’s largest internet economy, which played a positive role in our response to Covid-19. Our online work, online shopping, online education, and online medical services are flourishing and have become deeply integrated with the offline economy. We should ride this momentum to accelerate the development of the digital economy, digital society, and digital government, move ahead with digital upgrading across sectors, and actively participate in the formulation of international rules for digital currencies and digital taxation so as to develop new competitive strengths. We must also be clear, however, that the real economy is the foundation of our economy and manufacturing industries must not be neglected. As a large country with a population of 1.4 billion, China must be basically self-sufficient in food production and industrial development. We must never forget this.
To ensure the economy operates as normal, we must enhance our awareness of disaster prevention and preparedness. As the saying goes, “Weather changes wildly, and fortunes change in a day.” We must greatly improve our systems and capacity for disaster prevention and preparedness, sparing no expense or effort to ensure readiness for all possible disasters, even if most of them never happen. In some sectors, we must be prepared for once-in-a-century disasters. We must follow the principle of “walking on two legs,” having both central and local, both state and commercial, and both military and civilian stockpiles, and both stockpiles of goods and production capacity. We must optimize the types and locations of stockpiled emergency supplies, rationally determine the size of stockpiles needed, and comprehensively increase investment and construction in this area.
State-owned enterprises (SOEs) have led the charge and played a vital role in containing Covid-19, and have been instrumental in stimulating industrial circulation. They are an important material and political foundation of socialism with Chinese characteristics and a pillar supporting our Party’s efforts to govern and rejuvenate the country; we must help them grow stronger and bigger and do better. SOEs should be reformed, but must never be rejected or weakened. We must adhere to and improve the new nationwide mobilization system and constantly improve leadership, organization, and implementation.
This battle against Covid-19 has made us realize that we must safeguard industrial and supply chains as global public goods and resolutely oppose their politicization and weaponization. We need to formulate in the course of international trade and economic negotiations an international consensus and norms on protecting global industrial and supply chains and eliminating the influence of non-economic factors, and we must strive through international cooperation to foil attempts to undermine global industrial and supply chains.
Third, we must improve our country’s urbanization strategy.
What urbanization approach should China adopt? This is a major issue, and the key to getting it right is to make protecting the health and safety of our people the basic goal of urban development. At present, 60.6% of China’s population is permanent urban residents, and the figure is likely to rise in the coming years. We should promote people-centered urbanization and make our cities healthier, safer, and more livable, so that our people can enjoy a high quality of life.
It accords with objective principles to enhance the economic and population carrying capacities of areas with economic development advantages, such as major cities and urban agglomerations. Yet, economic scale should not be the only factor in urban development. Ecology and security should be given greater priority in urban planning, and economic, living, ecological, and safety requirements should all be considered. We should apply our people-centered development philosophy, make all-around social progress and well-rounded development of people our starting point, and formulate urban development plans guided by the vision of eco-civilization and an integrative approach to national security, so as to make our cities more livable, resilient, and intelligent and establish high-quality urban ecosystems and security systems.
The concentration of industries and people in advantageous regions is an objective economic law, but no city should grow indefinitely. The current population density of China’s megacities (each with over 10 million permanent residents in urban areas) and large cities (each with 5-10 million permanent residents in urban areas) is very high. For example, the main urban districts of Beijing and Shanghai have population densities of over 20,000 per square kilometer, compared to about 13,000 in Tokyo and New York. In the long run, cities across China need to bring their population density under control, and there needs to be standards for controlling the average population density of major cities. We need to build new suburban cities with integrated industries, balanced job and housing provisions, livable environments, and convenient transportation; encourage polycentric development and suburbanization; promote the orderly construction of digital cities; improve intelligent management capabilities; and gradually solve the problems of excessive population density and overloaded functions in central urban areas.
Circumstances vary significantly in different parts of our country, so we should promote diverse urban layouts based on local conditions. In densely populated areas, such as in eastern China, it is important to optimize the internal spatial structure of urban agglomerations, reasonably control the size of major cities, and prevent unbridled urban sprawl. We should develop city clusters and form polycentric, multi-level, and multi-node urban agglomeration networks. There must not only be strong interconnections between cities, but also necessary ecological and security barriers. Provinces and autonomous regions in central and western China with the right conditions should nurture multiple major cities to avoid being disadvantaged by having only one major city. There are 1,881 counties and county-level cities in China, and it is common for rural residents to buy houses and gravitate toward county towns. We should select a group of county towns for prioritized development and enhanced policy guidance, to make them important points of support for expanding domestic demand. When it comes to upgrading old urban areas and residential communities, there is huge demand and room for development in areas such as underground plumbing and wiring, construction of parking lots, child and elderly care, housekeeping, education, and medical services.
Fourth, we must improve the mix of scientific and technological inputs and outputs.
Containing Covid-19 has posed a stern test for our science and technology community; its important role was made very apparent, but its weaknesses were also exposed. We need to improve the distribution of scientific and technological resources, strengthen our ability to make scientific and technological innovations, and pursue a path of scientific and technological R&D suited to China’s conditions.
We need to adopt a goal- and problem-oriented approach to scientific and technological development. Protecting the health and safety of the people is an important task for our Party and government, from which scientific and technological research should draw inspiration to address profound questions in cutting-edge technologies and breakthroughs. We need to attach greater importance to basic research in life sciences, including genetics, genomics, virology, epidemiology, and immunology; accelerate R&D and innovations in relevant medicines and vaccines; and put more emphasis on the use of IT and big data in these fields. We should value top-level design, optimize the layout of basic research, and grow our areas of strength. We need to improve the setup of disciplines in universities, strengthen education of basic disciplines and cultivation of capable personnel, and shore up weaknesses in less popular disciplines. With these efforts, we will gradually strengthen our system of basic research and produce more original innovations.
During our Covid-19 response, collaborations between businesses, universities, and research institutes have produced positive results, setting good examples for us to study and follow. We should create a new mechanism for applying scientific and technological advances, with enterprises being the main actors and the government coordinating the efforts of all sides. We should link up funding, technology, applications, markets, and other factors and work hard to solve both the “first mile” problem of conducting basic research and the “last mile” problem of commercializing and applying advances, so as to ensure innovation and value chains are effectively connected among businesses, universities, and research institutes.
Fifth, we must ensure harmony between humans and nature.
I have repeatedly emphasized that humans and nature form a community of life. As human beings, we must respect nature, follow its ways, and protect it. Our Covid-19 response has made us more keenly aware that building an eco-civilization is vital to our nation’s sustainable development, and our pursuit of economic and social progress must be based on harmony between humans and nature.
Friedrich Engels made it clear long ago: “Let us not, however, flatter ourselves overmuch on account of our human victories over nature. For each such victory nature takes its revenge on us.” Since the first industrial revolution, humankind has constantly become better able to exploit nature, but overdevelopment has led to a reduction in biodiversity, forced wildlife migrations, and increased transmission of wildlife pathogens. Since the beginning of this century, humankind has suffered from SARS, avian influenza, MERS, Ebola, and Covid-19, as the emergence of new infectious diseases has become more frequent worldwide. Only by maintaining a balance between humans and nature and preserving ecosystems can we protect human health. We must understand deeply that humans and nature form a community of life and step up efforts on all fronts to build an eco-civilization. We must always uphold ecological progress.
Increasing human activities continue to touch the boundaries and baselines of ecosystems. We must protect boundaries and baselines, both tangible and intangible, to ensure harmony between humans and nature. We need to improve planning regarding our territorial space, ensure implementation of the functional zoning strategy, and draw up redlines for protecting ecosystems. We should accelerate efforts to establish a system of nature reserves, develop biodiversity protection networks, and define reasonable spatial limits for economic and social activities.
We should enhance our whole nation’s awareness of the need to protect the environment and ecosystems, encourage green production and consumption, and promote healthy and positive ways of working and living. We should carry out patriotic health campaigns extensively, advocate healthy diets and lifestyles, and crack down hard on illegal wildlife hunting and trade.
Sixth, we must strengthen our public health system.
Though we can boast our remarkable achievements in public health, we must move quickly to strengthen areas of weakness exposed in our response to Covid-19.
We need to improve top-level design to elevate the role of the public health system in our country’s governance structure, develop public health institutions at the central, provincial, city, and county levels, strengthen cultivation of health specialists and training of health workers, and enhance their ability to perform their duties. We need to improve the public health environment in rural and urban areas and develop strong prevention and control capabilities and public health services in villages and communities. We need to step up planning and construction of public health institutions, departments of infectious diseases in hospitals, and biological laboratories, and ensure sound management of sensitive medical and experimental data. We need to boost education of health care and scientific knowledge and increase people’s awareness of public health. Traditional Chinese medicine has played an important role in our Covid-19 response. We should draw on our experience, carry out scientific research, work hard to develop traditional Chinese medicine, and integrate it with Western medicine, so as to constantly improve our capabilities in this regard.
Our fights against major infectious diseases have revealed that we must move more quickly to develop a bottom-up system that ensures early detection, warning, and response so as to control diseases as they arise. We need to make enhancing initial monitoring and early warning capabilities the most urgent priority as we improve our public health system and develop our public health emergency management system. We need to strengthen information sharing between disease control and prevention centers, hospitals, and research institutes to enhance their abilities to provide early warnings of infectious diseases, known or unknown.
(This was a speech made by General Secretary Xi Jinping at the seventh meeting of the Central Financial and Economic Commission on April 10, 2020.)