Finding the best path forward
By Yao Yang |
chinawatch.cn |
Updated: 2019-01-29 15:17
Over the past decade, China has undergone a significant structural transformation in two aspects. First, its growth model has turned from an export-oriented one to a domestic demand-driven model. Before 2010, China's economic growth was mainly driven by exports and real estate, but domestic demand has increased since 2012. On the other hand, the peak era of China's industrialization has passed, and its GDP growth generated by industry has declined since 2012.
The above two changes indicate that China's economic growth, which was largely driven by exports in the past, is now being driven more by domestic demand and innovation.
In the 13th Five-Year Plan (2016-20), the government proposed that China transform its economy to focus on innovation. The transformations in recent years and government policies both demonstrate that the importance of innovation will continue to grow in the future.
In terms of innovation, there are different models, such as the US model and the German model. The US model is creative, but disruptive to both traditional products and industry, and it has polarized the rich and the poor. Nevertheless, one of the reasons why the United States maintains its stability despite the huge wealth gap is because of its individualistic culture.
In contrast, Germany is relatively disadvantaged in the internet and chip sectors compared with the US. It is inclined to the model of optimizing its industry and doing an extraordinary good job in products to capture market share, which contributes to its employment rate and social stability. Namely, Germany implemented industrial 4.0 to enhance its manufacturing industry that is suitable for its national situation.
Culturally, China is suitable for both the US and the German models under its tolerant culture toward both individualism and collectivism. For example, Jack Ma's success is a typical example of the individualistic model of the US; he created a business empire via his outstanding entrepreneurship. Meanwhile, China promotes collectivism as well, there are many entrepreneurs who give the nation's interests top priority, pursuing respect and harmony when practicing innovation in their business. Historically, for example, China was advantaged in labor-intensive industry at the beginning of reform and opening-up. But after two decades of rapid development, the proportion of labor-intensive products such as clothing in its exports sharply declined while the proportion of electronic and machinery products greatly increased, which shows that China's economic growth mode has shifted from extensive to intensive.
There are many cities in China that have the potential to become world innovation centers, such as Shenzhen, Hangzhou and Suzhou, for example. At the same time, China should continue to apply its existing strengths in areas such as iron and steel and ship manufacturing.
Cities in China should consider their cultural, historical and geographical situations when choosing their innovation and development models.
China is a huge country covering 9.6 million square kilometers and has unequal economic development levels as well as diversified cultures in different places. Western China has a good foundation for labor-intensive industry, thus it is advisable to build on its advantages and adopt an optimizing innovation model. Therefore, cities in western China should select the suitable innovation model based on their own circumstances from cultural, historical and geographical perspectives.
A decade ago, there were only 35 Chinese companies listed on the world's top 500 and now, this number has risen to 120, exceeding Japan and behind only the US. Now China is thinking how to be stronger. But in face of the innovation, it is important to choose the best path on the basis of its cultural, historical and geographical conditions.
The author is president of National School of Development at Peking University. The views expressed do not necessarily reflect those of China Watch.
All rights reserved. Copying or sharing of any content for other than personal use is prohibited without prior written permission.
Over the past decade, China has undergone a significant structural transformation in two aspects. First, its growth model has turned from an export-oriented one to a domestic demand-driven model. Before 2010, China's economic growth was mainly driven by exports and real estate, but domestic demand has increased since 2012. On the other hand, the peak era of China's industrialization has passed, and its GDP growth generated by industry has declined since 2012.
The above two changes indicate that China's economic growth, which was largely driven by exports in the past, is now being driven more by domestic demand and innovation.
In the 13th Five-Year Plan (2016-20), the government proposed that China transform its economy to focus on innovation. The transformations in recent years and government policies both demonstrate that the importance of innovation will continue to grow in the future.
In terms of innovation, there are different models, such as the US model and the German model. The US model is creative, but disruptive to both traditional products and industry, and it has polarized the rich and the poor. Nevertheless, one of the reasons why the United States maintains its stability despite the huge wealth gap is because of its individualistic culture.
In contrast, Germany is relatively disadvantaged in the internet and chip sectors compared with the US. It is inclined to the model of optimizing its industry and doing an extraordinary good job in products to capture market share, which contributes to its employment rate and social stability. Namely, Germany implemented industrial 4.0 to enhance its manufacturing industry that is suitable for its national situation.
Culturally, China is suitable for both the US and the German models under its tolerant culture toward both individualism and collectivism. For example, Jack Ma's success is a typical example of the individualistic model of the US; he created a business empire via his outstanding entrepreneurship. Meanwhile, China promotes collectivism as well, there are many entrepreneurs who give the nation's interests top priority, pursuing respect and harmony when practicing innovation in their business. Historically, for example, China was advantaged in labor-intensive industry at the beginning of reform and opening-up. But after two decades of rapid development, the proportion of labor-intensive products such as clothing in its exports sharply declined while the proportion of electronic and machinery products greatly increased, which shows that China's economic growth mode has shifted from extensive to intensive.
There are many cities in China that have the potential to become world innovation centers, such as Shenzhen, Hangzhou and Suzhou, for example. At the same time, China should continue to apply its existing strengths in areas such as iron and steel and ship manufacturing.
Cities in China should consider their cultural, historical and geographical situations when choosing their innovation and development models.
China is a huge country covering 9.6 million square kilometers and has unequal economic development levels as well as diversified cultures in different places. Western China has a good foundation for labor-intensive industry, thus it is advisable to build on its advantages and adopt an optimizing innovation model. Therefore, cities in western China should select the suitable innovation model based on their own circumstances from cultural, historical and geographical perspectives.
A decade ago, there were only 35 Chinese companies listed on the world's top 500 and now, this number has risen to 120, exceeding Japan and behind only the US. Now China is thinking how to be stronger. But in face of the innovation, it is important to choose the best path on the basis of its cultural, historical and geographical conditions.
The author is president of National School of Development at Peking University. The views expressed do not necessarily reflect those of China Watch.
All rights reserved. Copying or sharing of any content for other than personal use is prohibited without prior written permission.
