As much of the world scrambles to prevent further waves of coronavirus from blocking the fragile recovery from the recession, the Chinese economy appears to have reached cruising speed. In fact, economic recovery may not be an appropriate term to describe China’s economic boom, because in China’s case, the pandemic has caused something that looks more like stagnation than a recession. .
With the return to normalcy of society, innovation and pre-existing digitization are boosting economic growth in China. The shock of the pandemic has reinforced the trend towards digitization and investment in innovation in China, and its accelerated impact has gradually kicked in with the economy returning to normal. Here, we will first analyze why the Chinese economy continues to thrive even after being shocked by COVID-19, and then we will explain the new economic directions in China and the challenges in the near future.
China reported 4.9 percent GDP growth in the third quarter from a year ago, bringing growth for the first three quarters of the year to 0.7 percent year-on-year, according to data released on October 20 by the National Bureau of Statistics. China’s imports and exports grew rapidly in September, with imports increasing 13.2% and exports 9.9% from the previous year. As observed in international trade, the pandemic hit developed countries hard, causing a sharp reduction in their degree of centrality in trade networks, but did not affect China’s central position. In addition, China retains its 14th place among the best performing economies in the 2020 Global Innovation Index (GII) released on September 2, according to the United Nations World Intellectual Property Organization (WIPO). WIPO Director General Francis Gurry said the COVID-19 pandemic as a whole appeared to be stimulating an “acceleration of pre-existing trends”, predicting that one of the trends that could be accelerated by the pandemic is movement to Asia.
Shenzhen has been regarded as the landmark of China’s reform for 40 years and is now regarded as one of the world’s leading innovation hubs. Its rise is a case study for China’s continued economic boom.
First, the Shenzhen reform is supported by the central government. On the 40th anniversary of the establishment of the Special Economic Zone in Shenzhen, President Xi Jinping announced his support for the city’s pilot reform with full authorization, with demands for comprehensive deepening of the reform, d ‘broadening the opening up, modernizing the governance system and actively promoting the development of the Guangdong-Hong Kong-Macao Great Bay region.
Second, the dynamic young workforce has made Shenzhen a focal point of exchange and growth for a new generation of Chinese innovators. Shenzhen has the highest proportion of “engine room” population of any city in the world. Third, regional connections have made Shenzhen the place of China’s reform and opening-up.
As a showcase for China’s economic success, it is telling that Shenzhen is now a hub of innovation and technology. Focused on digital connectivity, innovation and entrepreneurship, and the exchange and development of technological talent, the first meeting of the Smart City Initiative (SCI) Implementation Committee was held in Singapore and Shenzhen on June 17, 2020. COVID-19 has accelerated the pace of digitization in Singapore and Shenzhen and made digital connectivity between the two parties “even more relevant.” The two cities have entered into eight memoranda of understanding for better access to market opportunities in the Guangdong-Hong Kong-Macao (GBA) Greater Bay Area and Southeast Asia.
The Chinese government has played an important role in increasing investment in research and development and in the governance of the innovation market. China continued its year-round streak of double-digit percentage increases in R&D spending in 2019. Total public and private spending on science and technology in 2019 rose 12.5% from the previous year to reach 2.21 trillion Chinese renminbi ($ 322 billion), amounting to 2.23. percentage of GDP. For comparison, the United States spent 2.83% of GDP, OECD countries collectively spent 2.38% of GDP, Israel and South Korea spent 4.9% and 4, respectively, 5% of GDP in 2018. The goal of devoting 2.5% of GDP to R&D by 2020 was set out in China’s most recent five-year plan and in the 15-year medium and long-term program for the development of science and technology.
As in other East Asian economies, government intervention has been an important part of China’s development. As Robert Wade says, evidence from East Asian countries shows us that government can, under certain circumstances, guide the market to produce better industrial performance than a free market. On September 22, Xi chaired a scientists’ symposium, stressing that we must advance science and technology in a broad and in-depth manner in order to meet the forefront of global science and technology, the main battleground of the economy, the main national needs and people’s lives and lives. health. The central government attaches great importance to reforming the scientific and technological innovation system and improving the innovation ecology.
“The core solution to strangled technologies is not just a scientific issue, an innovative product, but the weak link in China’s overall operating mechanism on the scientific and technological innovation system and industrial development,” said Lan Xue, director of China Center for Science and Technology Policy, said at the China-US Physics Review and Application Conference on October 18. It takes time to build a modern innovation system and accumulate industrial innovation capabilities, while time has always been ignored in the never-ending march of technology.
Xiaomeng Kang is a research assistant at the Intellisia Institute and Dingding Chen is president of the Intellisia Institute in Guangzhou, China.