China Center for International Economic Exchanges

Chen Wenling: Strategic Significance and Suggestions for High-Quality Development
Date:Sep 06,2018    Source:CCIEE

The current world is at a crossroads and has to choose from one of the following two paths: we can choose a path which is open, forward-looking, multilateral and justified, or should we go for the one which is closed, backward, unilateral and hegemonic. Should we put the interests of one country above other nations, or should we build a common community with a shared future for mankind? Should we follow the principles of mutual consultation, joint contribution and shared benefits? The choice we make will not just determine the future of China, but also the future of the US-China relations, and the future of the world. Therefore, it is of great significance for us to study China’s high-quality development at this critical moment.

The special significance of the high quality development.

(1) High-quality development is needed by big countries to compete with each other.

The competition between big countries has become increasingly fierce and a typical example is the competition between China and the United States. From a global perspective, big powers no longer want to be followers but are striving to make their country bigger and stronger. Since the end of the Cold War, the international pattern has evolved from the two-superpower to the current stage of authoritarianism, strongman politics, and the fierce competition. The international politics, economy, culture, diplomacy and military have undergone profound changes and adjustments. In particular, the competition between China and the United States concerns not only the Chinese people, but also the American people and the rest of the world. China and the US represent two different directions and paths, which has led to fierce collision between two different values ??and ideas. The core of the competition between countries in the future is whether a country has hard power, sophisticated technology, and a high-quality development strategy combing both the soft and hard power.

So far, the United States has launched trade wars with 34 countries and many countries and regions have fought back, such as the EU, Canada, Mexico, India and China. China and the US have conducted difficult negotiation in this process. The frequent competition between China and the United States is not just about fierce trade frictions, but more concerned with high-quality development, core technologies and manufacturing of the two countries. In the long term, high-quality development is the fundamental policy response of China to the US strategic shift. Without high-quality development, the trade surplus alone cannot help China to win the competition. Trade is essentially a matter of buying and selling. The United States imports from China because it needs Chinese goods. At present, the trade between China and the United States is more than US$600 billion. Most of China’s exports to the United States are low-end products, and the value of the exported goods do not match the profit China deserves. The report of the 19th National Congress of the Communist Party of China stated that China’s economy has shifted from a stage of high-speed growth to a stage of high-quality development. I think this transformation is essential for China’s victory in the future.

(2) High-quality development is the only way to meet the requirements of the fifth round of manufacturing shift.

Due to rising costs in land, resource and environment in China, many foreign companies have shifted their manufacturing from China to Southeast Asia, South Asia, Africa, North America, and South America in recent years. From January to April this year, China’s export surplus decreased by 24%, and 27% in May. In the first half of this year, a trade deficit of US$20.5 billion appeared for the first time, indicating that the new round of industrial transfer is faster than we expected. The clothing and footwear manufacturers from the United States and Japan have relocated their production from China to other low-cost emerging countries like Indonesia, Malaysia, the Philippines, Bangladesh, Vietnam. Therefore, China must adhere to high-quality development and elevate its industry to the middle and high-end industrial chain, which will help it to achieve sustainable economic development. If China wants to remain competitive in the new global industrial transfer, it must maintain sustainable high-quality development.

(3) Realizing high-quality development to meet the people’s growing need for a better life.

Cross-border e-commerce has now become a channel for sourcing global branded products. Among the goods China imported from Japan, medicine is the most demanded product but many of these medicines are actually originated from traditional Chinese medicine. China is an ancient civilization with a history of 5,000 years and its manufacturing industry has a glorious history of 1800 years. Chinese products used to be a worldwide collection and value-added wealth. Nowadays, many products need to be purchased from overseas through cross-border e-commerce and hence, foreign overseas warehouses and buyers have become a lucrative industry. In order to meet people’s growing needs for a better life and bring overseas consumption back to China, we should accelerate high-quality development and create effective supply of quality goods.

(4) High-quality development is necessary for building a great modern socialist country

According to the report of the 19th National Congress of the Communist Party of China, our goal is to basically realize socialist modernization by 2035, and to make China a great modern socialist country which is prosperous, strong, democratic, civilized, harmonious and beautiful by 2050. China has the world’s second largest economy, the largest trade volume and the highest manufacturing output/GDP ratio, but these factors do not mean that China is a strong country because we should assess achievements by per capita. High quality development has become the primary task in the new era of socialism with Chinese characteristics, which is essential for building a great modern socialist country.

(5) High quality development is important for shaping China’s image.

In the international market, Chinese goods were once considered inferior for a long time at the beginning of China’s reform and opening up. Later, the quality of goods has improved significantly and many goods are OEM, which were exported to overseas first and then imported back to China. Despite the progress made in the quality and price of domestic products, the quality of supply and service need to be improved. As the Chinese consumers demand more diversified, high-quality and personalized products, many of them have spent a large amount of their savings on overseas shopping. To reshape the image of China, we must have good products, a high-quality market that can be praised by the rest of the world, and bring the huge overseas consumption back to China.

In order to achieve high quality development, we need to handle the following relationships properly.

First of all, the relationship between being big and strong. A country with a large economy does not mean that the country is strong. By achieving high-quality development with improved economic quality, we will be able to resist risks.

Second, the relationship between industrial structures. I believe that it will be a mistake if we simply adjust the third industrial structure in accordance with the western development model, over-emphasize the proportion of the service industry, or use the service industry as an indicator to measure the adjustment of local economic structure. As a big country with a population of nearly 1.4 billion, manufacturing should always be the foundation of the national economy. We should avoid the hollow phenomenon in the manufacturing industry and extend the prosperity of the manufacturing industry. In this regard, the United States and the European Union have learned their lessons. Many countries with hollowed industries now want to revive their manufacturing industries, however, they have failed to do so after making various efforts. Therefore, we should not undermine the manufacturing industry but to make it bigger and stronger. Of course, the service industry is also very important, but it should be used to serve the manufacturing industry and consumers’ demand, and adapt itself to the stage of economic development, rather than being a completely independent industry that can replace the development of manufacturing.

Third, the relationship between the whole industry chain and the division of labor in global industrial chain. According to our research on domestic technology companies, many corporate executives believe that the global industrial chain formed by the global division of labor according to comparative advantages is reasonable and conforms to the law of economic globalization. These companies are trying to seek development direction in the process of global industrial chain division. However, the sanctions imposed by the United States has disrupted the normal division of labor in some industrial chains. How should we see the division of labor between the global industrial chain and the industrial chain? I believe that the fundamental countermeasure is to move our industry to the high end of the global industrial chain as soon as possible. China’s enterprises should produce products with the best quality, no matter how small the product is. For example, the glass manufacturer Fuyao Group have become the world’s largest auto glass maker and acquired the well-known US company PPG. The company produces auto glass for high-end automakers such as Land Rover and Ford. By continuous product innovation, the company can produce better quality glass than all its competitors, which is why the company has become a market leader in the international market and it has not been affected by the US-China trade frictions. This demonstrates the competitive advantage an enterprise has when it stands at the high end of the global industry chain.

Fourth, the relationship between original innovation, introduction-based innovation and integrated innovation. In the course of the 40 years of reform and opening up, China has attached great importance to learn from other countries’ innovation and make it better. In terms of integrated innovation, China has also made great progress. For example, China’s high-speed rail is based on the introduction of Japan’s Shinkansen and Germany’s technology but later on, it has made the technology much better. In other worlds, the technology needed for the speed below 250 kilometers is learned from other countries but the technology for making the train faster than 250 kilometers is developed by China on its own. What China needs most now is original innovation, which is also a weakness of China. The number of academic papers published in China ranks the first in the world, and it also have the largest number of patents in the world. However, the patents we have are mainly design patents. What we really need is invention patents and the outcome from original innovations.

Fifth, the relationship between ingenuity and shoddy products. What is a masterpiece? For example, among the 232 German-owned SMEs in Jiangsu, 38 companies are the world’s hidden champions in their respective industries. A company that produces pencil sharpeners has a history of 236 years and the pencil sharpeners they produce are the best of the world. This is a masterpiece. Not long ago, there was a TV show introducing a black enamel porcelain bowl with two leaves, which was a demonstration of the kiln technique from China’s Tang and Song Dynasties. Later, this handicraft has become a collection of a Japanese Museum, worth hundreds of thousands of Yuan. Now we have a craftsman who spent nearly 20 years to develop this traditional technique. Without such kind of research and development, this porcelain bowl is only a Japanese collection.

In addition, we must take the real economy as the foundation and take into account the development of the virtual economy. The two should move forward steadily. We must value talents, treat people as the first production factor and exert their enthusiasm and creativity so as to enable all wealth-creating resources flow smoothly. We must create a better institutional environment and market environment, reform the top-level structure and adjust production relation to further liberate productivity.

 

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