Innovation and New Quality Productive Forces Key Components in China’s Economy

At one of his appearances at the Two Sessions President Xi Jinping emphasised that China’s need for self reliance must now focus on technological innovation to enhance productivity and invest in manufacturing.

Chinese President Xi Jinping

Published Apr 4, 2024


Jaya Josie, Adviser Zhejiang University International Business School (ZIBS), Adjunct Professor University of the Western Cape and University of Venda

During China’s Central Economic Work Conference held in December 2023 the key economic priority for 2024 was economic growth. The conference highlighted several new priorities on which China will have to focus.

The country will have to place emphasis on integrating scientific and technological innovation into the new productive forces for moving towards constructing a modern industrial system. The aim of the system will focus on boosting domestic demand; reforms in fiscal policy and intergovernmental governance; opening up certain industries such as health care, services and telecommunications and, stability in the financial sector focusing particularly on the property market and the prevention of potential risk of local government debt.

Other areas such as the agriculture and rural work, regional coordination, green low-carbon development and improving household livelihoods will be a target for the new modern economy. These themes were subsequently taken up and confirmed in the Two Sessions of the National People’s Congress (NPC) in early March 2024.

A key outcome of the Two Sessions was the emphasis placed on using the principle of new productive forces to drive China’s development. At one of his appearances at the Two Sessions President Xi Jinping emphasised that China’s need for self reliance must now focus on technological innovation to enhance productivity and invest in manufacturing. To develop new productive forces the country should increase innovation efforts targeting the upgrade of traditional industries, expand emerging industries and cultivate future industries.

While in the media China’s adoption of the new productive is often portrayed as a slogan to drive economic policy, the principle of productive forces driving an economy is well established in socialist economic theory. Initially, productive forces were defined as labour, capital and raw materials working together in manufacturing to drive industrialization and the production of goods and services.

However, advanced socialist economic thinking argued that unless technology and innovation were integrated into the mix of productive forces manufacturing will not take on a dynamic to advance to higher stages of economic growth and development Constantly developing and integrating new productive technologies through science, research and development has helped China leap-frog beyond the initial developments of the fourth industrial revolution.

The NPC Two Sessions has projected a 5% growth in the economy over the next five years with emphasis on diversification, increasing consumption and expanding investment in science and technology.

Although the term “new productive forces” is attributed to President Xi Jinping’s statement in September 2023, the term has been part of China’s lexicon from the time of the economicreforms initiated in the late 1970s.

Discussions on adapting and advancing productive forces has always been an integral part of China’s thinking on advancing socialism in the interest of its people from the inception of the People’s Republic of China.

Modernization has always been part of economic planning in China and was perceived as a way developing socialism within the specific socio-economic conditions of China. Modernisation of the economic system is a key component of the political economy in China and has since become known today as socialism with Chinese characteristics. Including technology and innovation as an integral part of productive forces adds the “new” to the term, and has always been part of socialist economic thinking in China.

Using technology, science and innovation the socialist political economy in China has managed to lift 800 million of its citizens out of absolute poverty and, today it is often characterised as the second largest economy in the world. Today the use of technologically advanced hardware and information technology software is part of the so-called fourth industrial revolution.

Innovation and new quality productive forces are integral to China’s thrust towards a new industrial system.

However, China is integrating this new focus of its economic development into its commitment to the Belt an Road Initiative (BRI) to promote common prosperity for humanity. Africa and South Africa in particular have been major recipients of the focus on developing new productive forces in China. In 2021 one of China’s leading electronic manufacturing companies TCL Electronics entered the South African market. The company promised affordable and smart electronic appliances and devices for all South Africans.

Other companies such as Hisense, Huawei and, other online shopping companies such as Shein. Since it entered the South African market in November 2021, TCL has become a household name in the country. Hisense has established an assembly plant in the Western Cape and employs many South Africans.

During the BRICS Summit in August 2023 and following the state visit of President Xi Jinping the ministries of trade and industry of the two countries entered into agreements that would promote trade and investment into South Africa with the aim of addressing unemployment, poverty and inequality in the country.

The objective for China here is to promote the message that trade and investment in South Africa will help with diffusing China’s investment in new productive forces into South Africa attempts to reindustrialise and compete globally.

Two MOUs between South Africa and China were signed on 21 August 2023 between South Africa’s Department of Trade Industry and Competition and the China Africa Development Fund (CADF), and between South Africa’s Industrial Development Corporation (IDC) and the Bank of China. The MOU with CADF focused on investment in manufacturing and other productive sectors promoting job creation through and targeting electronics, capital equipment, iron and steel and, the digital and green economy sectors.

The partners anticipate that such investment will create conditions for developing South Africa’s own new productive forces for industrial development in medical equipment, green economy, critical raw materials, electric vehicles and hydrogen. The MOU also focused on developing special economic zones (SEZ) in areas that have hitherto been neglected. The MOUs further included plans for knowledge sharing and opportunities for building value chains in key sectors when developing SEZs.

The MOU between the IDC and the Bank of China will consolidated regional trade and investment in Southern Africa in the context of the African Free Trade Area through a R10 billion funding package over five years. This is China’s way of spreading its message of using the BRI to extend common prosperity into the global south in general and Africa in particular.

The development of innovation and technology as part of the push for new productive forces in China is being led by several industries and academic institutions. The newspaper China Daily Global reported on 5 March 2024 that the electronics manufacturer the TCL Technology Group Corp will upgrade technological innovation to promote new productive forces to advance China’s new industrial push in the economy. The article reported that over the past six years TCL had invested more than US$8.3 billion in Research and Development with patents totalling almost 100,000.

The company focuses on three main segments that include intelligent terminals, semiconductor displays and new energy photovoltaics. At the Central Economic Work Conference held in December TCL responded positively to the call to promote innovation, develop new industries and models with cutting edge technologies to foster new productive forces.

From the Zhejiang University International Business School (ZIBS) Digital Economy and Financial Innovation Center, the Co-Director, Pan Helin, explained that the new productive forces are different from the traditional productive forces of labour, land and capital and rely more on technological advancement and the innovative allocation of production factors and, industrial transformation and upgrade. He elaborated that new productive forces will move the manufacturing to the high end of the global value chain and add impetus to high quality economic development.

Academic institutions such as Zhejiang University International Business School (ZIBS play a significant role in the development of technology and finance in China and abroad.

Apart from the TCL link with South Africa, as an academic institution ZIBS also has a strong link with South Africa. As part of China’s people-to-people exchanges a ZIBS delegation visit in August 2023 led to the singing of MOU’s and Service Level Agreements with several universities across South Africa including, University of Pretoria’s Gordan Institute of Business (GIBS), University of Venda, University of the Western Cape (UWC) and Nelson Mandela University.

ZIBS is a leading international university globally and has strong partnerships with universities internationally. It is also in the forefront of innovation and technology with links with Ant Financial and other big technology corporations in the Hangzhou/Shanghai area.

Today China is very quickly moving ahead in the domain of robotics, artificial intelligence (AI), the internet of things, virtual and augmented reality, social networks, cloud computing, mobility, big data analysis, online retail, financial technology (fintech) and mobile payments that has fast tracked the advancement of new productive forces and higher levels of productivity.

These developments have transformed China’s into a digital world at a faster pace and a larger scale and in the process integrated many areas with multidimensional interactions both nationally and internationally. Developing and modernising technology has been the engine driving the modernisation of the economy in country. In addition to technology and innovation, China brings the principle of international solidarity and common prosperity through extending and expanding the benefits of new productive forces through opening up a new system of global value chains to developing countries in the Global South.

South Africa and Africa in general stand to benefit from the extension of new value chains that will be the outcome China’s modernization based on its adoption of innovation and technology. Investment, innovation and adoption of value chains into the South African economy will most likely lead to reindustrialisation and perhaps address the challenges of unemployment, poverty and inequality.