External shocks pushing shift of growth model

Despite facing mounting external uncertainties, China has the conditions and capabilities to offset the impact of the United States' tariff threat and is poised to see sustained growth this year, with consistent policies, an ultra-large domestic market, thriving technological innovations and a deepening of reform and opening-up, said economists and executives.

As China has prioritized expanding domestic demand and boosting technological innovations on its economic agenda for the year, economists said the move marks the country's shift to shaping a consumption- and innovation-driven economy.

Their comments came after data from the National Bureau of Statistics showed that China's economy expanded 5.4 percent year-on-year in the first quarter of this year.

Economists said China performed better than expected at the beginning of the year, with existing policy stimulus measures taking effect gradually and new incremental policies put in place, making solid steps to tackle issues faced by the economy and navigate a grimmer external environment.

Facing rising external challenges such as heightened US tariffs, China is addressing key challenges by boosting consumer demand, deepening reforms and accelerating industrial transformation — core priorities emphasized by President Xi Jinping at the Central Economic Work Conference in December as essential to balancing supply and demand, and sustaining long-term growth.

The country should boost domestic demand, especially consumer demand, unswervingly deepen reform and expand opening-up, and promote the steady replacement of old growth drivers with new ones, as it seeks to address the prominent problem of insufficient demand, the deep-seated obstacles and external challenges that hinder development, and the bottlenecks in industrial transformation and upgrading, Xi said.

Niu Li, deputy director of the Department of Economic Forecasting at the State Information Center, said he believes that China's economy is on track for sustained growth despite facing external challenges, given the nation's ample policy space, its intensified efforts to deepen reform and opening-up, and the strengthening of new growth drivers.

"We will strive to achieve the annual growth target (of around 5 percent) this year," Niu said.

The central government said earlier this month that China has made full preparations to address various uncertainties in the face of the pressure that external shocks may exert on the country's economic stability.

"The shock that China is facing this time also presents an opportunity — a rare chance to transform its development model," said Wang Yiming, vice-chairman of the China Center for International Economic Exchanges. "Now we need to shift toward a model powered by domestic demand and innovation from the previous export- and investment-driven growth model.

"If we can truly use this opportunity to drive that shift, then the trade war initiated by the US — despite the challenges — may actually offer us valuable impetus for change."

"The priority is to take strong measures to comprehensively expand domestic demand and stabilize the fundamentals of the domestic economy, smoothing and strengthening domestic circulation," he said. "More important, breakthroughs must be accelerated in deepening reforms and expanding high-standard opening-up, laying a solid foundation for achieving the annual growth target this year."

Wang's views were shared by Zhang Yansheng, a researcher at the Chinese Academy of Macroeconomic Research.

Zhang said the key in responding to the US' economic bullying is to vitalize all market entities by bolstering people's expectations and deepening reforms to give the market a bigger say.

Robin Xing, chief China economist at Morgan Stanley, emphasized China's tech-focused initiatives, saying the country has put in place multichannel funding support, including a relending program, a State venture capital guidance fund, and the upcoming "sci-tech board" in its bond market, for frontier sectors like artificial intelligence, quantum computing and self-driving cars.

These initiatives collectively would attract a total investment of nearly 1.5 trillion yuan ($206 billion), Xing said.

In an article published in early March in Qiushi Journal, the flagship magazine of the Communist Party of China Central Committee, Xi said it is also necessary to coordinate the relationship between fostering new drivers and upgrading old ones, and promote the development of new quality productive forces in light of local conditions.

Zhang Li, president of the China Center for Information Industry Development, said: "Leveraging its robust and comprehensive industrial ecosystem, China creates expansive real-world testing grounds and vast market opportunities for technological innovation. This infrastructure not only accelerates the development of emerging industries, but also provides a resilient foundation for nurturing future-oriented sectors poised to redefine global markets."

Zheng Yongnian, dean of the School of Public Policy at Chinese University of Hong Kong (Shenzhen), said, "To cultivate new quality productive forces, a country should prioritize three foundational pillars — advancing fundamental scientific research, bridging the gap between theoretical discoveries and applied technological solutions, and fostering a financial ecosystem capable of sustaining innovation-driven growth.

"Expanding institutional opening-up is the strategic guarantee for nurturing new quality productive forces," Zheng added.