The Development Research Center of the State Council (DRC), the Ministry of Finance and the Word Bank Group jointly issued a report stating that China needs to cultivate new drivers to cope with productivity growth challenges, deepen reforms and opening-up and further promote innovation in the economy.

A workshop on cultivating New Drivers of China’s Economic Growth is held in Beijing on September 17. [photo/drc.gov.cn]

After nearly four decades of constant growth, China’s old drivers are running out of steam. China is now at a crossroads in its development as regards declining returns on public investment and its rapidly aging population.

The cultivation of new growth drivers requires more efficient allocation of resources, reduced environmental impact and increased productivity. To unleash new growth drivers, it is also necessary to promote governance reforms and let the market play a decisive role in resource allocation, so as to realize the transformation of China's innovation system.

Liu Kun, Minister of Finance, said that it is necessary for China to promote new growth drivers and increase productivity, adding that China needs to improve economic efficiency, competitiveness and productivity through reform.

The report presents valuable insights and recommendations for a reform agenda for building a more innovative and productive economy, said Liu.

Ma Jiantang, Secretary of the Leading Party Members’ Group of DRC, said that China's economy is shifting from high-speed growth to high-quality development, and relies on deeper reform, higher levels of openness, and more integrated and efficient innovation to boost productivity and build a modern economic system.

Ma said that the joint research has reference value for China in fostering new growth drivers and promoting a new round of reform and opening-up.

Victoria Kwakwa, Vice President for East Asia and Pacific of the Word Bank, said that eliminating the remaining distortions in the economy and reducing barriers to market competition are crucial to China’s innovation promotion.

The report points out that China can pursue more innovation and productivity-led growth by addressing the 3 Ds (distortion, diffusion and discovery): removing distortions in the allocation of resources, accelerating diffusion of advanced technologies and innovations, and fostering discovery of new products and technologies, thus expanding China’s productivity boundaries.

It proposes the 3 Ds approach to address seven critical areas of structural and institutional reforms including strengthening competition, creating a fair playing field for all investors, improving the national innovation system, strengthening human capital management, allocating financial and human resources more efficiently, promoting regional coordinated development, improving international competitiveness and improving supervision and governance methods to better handle the relationship between the government and the market.

In order to allocate resources more efficiently and eliminate distortions, the report proposes to further optimize the business environment, accelerate the reform of State-owned enterprises, and standardize the government's support for specific industries.

Besides, the report mentions that promoting market competition is also crucial for technology diffusion, and that China still needs to improve its innovation system to further promote the invention and creation of new products and processes, unleash new drivers of growth and continue to deepen reform while strengthening the regulatory system, the rule of law, and reform of public service management