Innovation New Driver of China’s Economy

by Chen Qiqing

The government work report delivered by Premier Li Keqiang at this years annual session of Chinas National Peoples Congress mentioned “innovation” many times. The report reviewed the successful results of innovation-driven development over the past five years. It attributed the social and economic achievements since the 18th National Congress of the Communist Party of China （CPC） partly to a commitment to innovation-driven development. The report proposed moving even faster to make China a country of innovators and stay abreast of trends of the latest global revolution in science and technology and industrial transformation， implement innovation-driven development strategy， and continue making the Chinese economy more innovative and competitive.

Innovation is the prime and foremost driver for development. Since the 18th CPC National Congress， China has committed to the principle of innovative development， implemented innovation-driven development strategy and promoted the construction of an innovative country.

Driven by innovation， Chinas economy is undergoing a series of major changes.

First， innovation has led to a fundamental change in the growth model. In Chinas case， its economy is shifting from driven by investment and factors to driven by innovation. With progress in innovation， especially technological innovation， investments contribution to economic growth is decreasing while science and technology are gaining an increasingly larger portion. In February 2018， Wan Gang， then Chinese Minister of Science and Technology， briefed reporters on the fact that the contribution rate of scientific and technological progress to economic growth has reached 57.5 percent， compared to 52.2 percent in 2012.

Second， innovation has promoted the optimization of economic structure. Chinas economic structure has undergone historical changes since the 18th CPC National Congress in 2012. Consumption has replaced investment to become the largest driving force for growth. The tertiary industry has surpassed the primary and secondary industries to gain the biggest portion in the economy， which could not have been achieved without contributions from innovation.

Third， innovation has quickened the evolution of growth engines. In recent years， some significant technological results have been quickly transferred into products or the productive force of strategically important industries， injecting new impetus into economic growth. For instance， Chinas latest generation of high-speed rail technology now leads the world and fosters an advanced high-speed railway industry. Chinas fourth generation of mobile communications standard， known as TD-LTE， has formed a complete industrial chain with users numbering more than 650 million. Sales of new energy vehicles neared 700，000 in 2017， with a year-on-year growth rate of 51.2 percent.

Driven by innovation， Chinas economy is casting off old modes characterized by high input， high consumption and heavy pollution. The country is on track towards innovative， green， quality， lucrative and sustainable development.

Although China has made remarkable achievements in innovation， it hasnt yet met the standards to become a leading innovative country and a science and technology giant. It is still dwarfed by developed countries in comprehensive strength for innovation. Due to a weak foundation for research， relatively low ability to produce original innovation， a lack of innovative human capital， especially high-end human capital， and many scientific and technological developments awaiting application， it is imperative for China to accelerate implementation of the innovationdriven development strategy.

To develop by innovating， we need innovators， which should be the market entities willing to innovate. The power to innovate comes mainly from competition and reform. First and foremost， competition should be introduced to drive innovation. Xi Jinping， general secretary of the CPC Central Committee， once pointed out that under the background of increasingly complex relations between supply and demand， many new technologies， new industries and new products are not discovered or fostered by the government， but through market competition. Restrictions on market access should be further removed， and monopolistic and protectionist behaviors should be eliminated so as to build an environment for fair competition.

Then， reform policies should be introduced to spark innovation. Xi once remarked that scientific and technological innovation is the new engine for Chinas development， and reform is the ignition system for the engine. Reform of institutions related to science and technology should continue， and old-fashioned regulations that hold back the encouragement of innovation should be abolished. Results of innovation shouldnt be locked in drawers， but applied to boost economic development. Only by putting it into action can innovation drive development. In recent years， more and more resources invested in scientific and technological development have produced desirable results.

This year marks the 40th anniversary of Chinas reform and opening up. China has achieved highspeed growth through reform， which is widely considered a “Chinese miracle”in the economic history of the world. Four decades later， Chinas economic development has entered a new era in which innovation is gradually becoming the primary force driving economic growth. We are eager to create another“Chinese miracle”—a miracle of highquality development.