Yuan Lei: New Quality Productive Forces Lead the Construction of a Modernized Economic System
Economic modernization is a vital component of national modernization. General Secretary Xi Jinping has pointed out that "building a modernized economic system is a strategic goal for China's development, as well as an urgent requirement for transforming the mode of economic development, optimizing the economic structure, and shifting the drivers of economic growth." The 20th National Congress of the CPC made strategic deployments for accelerating the construction of a modernized economic system. The Resolution of the Central Committee of the Communist Party of China on Further Comprehensively Deepening Reform and Advancing Chinese-path Modernization, adopted at the Third Plenary Session of the 20th CPC Central Committee, emphasized "completing the construction of a modernized economic system" when elucidating the reform goals and tasks for 2035. Developing new quality productive forces is an important path to resolving the new contradictions and problems facing China's economic and social development and for promoting the modernization of the economic system. Facing a new round of scientific and technological revolution and industrial transformation, we must seize opportunities, increase the intensity of innovation, and accelerate the construction of a modernized economic system led by new quality productive forces.
A Scientific Understanding of the Main Components
General Secretary Xi Jinping noted: "A modernized economic system is an organic whole composed of the mutual relations and internal linkages between various links, levels, and fields of social and economic activities." The construction of an economic system encompasses both the aspect of productive forces and the aspect of relations of production. Within this, productive forces determine the level and efficiency of economic development, while relations of production constitute the institutional framework of economic development. It can be said that the modernization of the economic system is the process of developing productive forces and forming corresponding relations of production.
It must be recognized that the contradictory movement between productive forces and relations of production determines the basic types of evolution in an economic system. Generally speaking, there are two basic scenarios in this contradictory movement: one is where the qualitative state [1] of productive forces has not made a leap, and relations of production generally adapt to the development of productive forces but contain imperfect links, thus moving toward continuous refinement. The other is when scientific and technological innovation brings about a leap in the qualitative state of productive forces, rendering many aspects of past relations of production difficult to adapt to development; this necessitates an adaptive reconstruction and revolutionary changes in the links of production, distribution, circulation, and consumption. Currently, the evolution of the economic system driven by new quality productive forces is essentially an adaptive reconstruction carried out by the economic system to accommodate the development of productive forces.
New quality productive forces are defined in contrast to traditional productive forces. They are formed based on scientific and technological innovation, especially leaps in the level of productive forces brought about by original and disruptive technological breakthroughs. Such leaps will trigger fundamental changes in the form of the economic system; its underlying logic, operating rules, and core architecture will undergo systematic reshaping, profoundly altering the modes of value creation, distribution, and circulation. This requires us to actively promote the reform of systems and mechanisms and take the initiative to construct a new type of institutional system that matches the development of advanced productive forces. This means that the modernized economic system China aims to build must take new quality productive forces as its core engine and new relations of production as its institutional support. It is a new type of economic system that implements the new development philosophy [2] and adapts to the requirements of high-quality development. From a certain perspective, it can be understood as being composed primarily of the following aspects:
A modernized production system. Production is the foundation of economic activity and determines the nature and form of other links. The essence of a modernized production system is an industrial system that carries new quality productive forces, characterized by being innovation-driven, coordinated in development, green and low-carbon, and open for win-win cooperation. Specifically, a modernized production system takes scientific and technological innovation as its lead, continuously optimizing resource allocation and forms of production organization to promote higher-efficiency development. It helps ameliorate deep-seated issues of unbalanced and uncoordinated economic development in China and continuously optimizes the spatial layout of productive forces. It adheres to green, low-carbon, and circular development, improving resource utilization efficiency to achieve greater economic and social benefits with lower resource and environmental costs. It fully utilizes the advanced scientific and technological achievements and beneficial management experience created by human society to form a higher-level open economy.
A modernized distribution system. Distribution is a primary element of the relations of production and directly impacts other links of social reproduction. A modernized distribution system is oriented toward adapting to the development of new quality productive forces, balancing efficiency and equity, and optimizing social resource allocation and wealth flow to form a distribution mechanism of "joint contribution and shared benefits" [3] at a higher level. First, it reflects an orientation toward knowledge, technology, and human capital, better stimulating the vitality of high-level factors of production and placing greater emphasis on knowledge innovation, technical contribution, and human capital value in income distribution. Second, it allows the market to better play its decisive role in resource allocation, evaluating the contribution of factors through changes in their supply and demand. Third, it better reflects the requirements of fairness and justice, constructing a more rational income distribution system that takes efficiency as an important goal to fully stimulate the vitality of market entities, while treating fairness as a rigid constraint that fully considers the diverse value demands of stakeholders. To this end, emphasis must be placed on strengthening the precision of secondary distribution [4] while releasing the potential of tertiary distribution [5] through institutional innovation, thereby achieving a dynamic balance between efficiency and equity.
A modernized circulation system. Circulation is the "blood vessels" of large-scale socialized production. Market circulation plays an important role in optimizing resource allocation, deepening the social division of labor, and satisfying market demand. A modernized circulation system is deeply integrated into the innovation ecosystem of developing new quality productive forces, achieving a new type of commodity and service flow that efficiently connects production to consumption through technological innovation and institutional change. Establishing a modernized circulation system requires accelerating the application of the latest technological achievements to reconstruct commercial, logistical, information, and capital flows through technological empowerment, model innovation, and green transformation. As technologies like artificial intelligence, autonomous driving, and digital twins mature, the circulation system further involves toward intelligence, borderlessness, and low-carbon operation. Simultaneously, establishing a modernized circulation system requires building a unified, open, competitive, and orderly market system. In a market economy, circulation relies on the market; market mechanisms determine circulation efficiency through dimensions such as resource allocation, institutional environment, and demand-pull. Building a unified, open, competitive, and orderly market system requires eliminating institutional barriers that hinder the circulation of goods and services, establishing a national unified large market, deepening the market-based reform of factors of production, improving factor market systems and rules, and promoting the efficient allocation of productive factors.
A modernized consumption system. Consumption is the key link in the realization of commodity value. The goods and services created in the production link must complete a "perilous leap" [6] through consumption to realize their value. A modernized consumption system upgrades traditional consumption behavior toward digitalization, intelligence, and ecological awareness through technological innovation, model transformation, and institutional optimization, providing the demand-side driver and application scenarios for the development of new quality productive forces. From the perspective of consumption philosophy, the traditional logic focused on "ownership" and "functional satisfaction" is being replaced by more dynamic and emotional concepts; consumption has become a comprehensive practice of individual expression and social connection. Regarding consumption content, traditional consumption is undergoing a profound transformation from physical to virtual, from single to integrated, and from functional to experiential. New types of consumption, such as digital consumption, green and low-carbon consumption, experiential consumption, and personalized/customized consumption, have become important areas of growth. In terms of consumption patterns, activities are characterized by fragmentation, immediacy, socialization, and intelligence. The popularization of 5G, AI, and the Internet of Things (IoT) promotes full-link digitalization of consumption scenarios, greatly enhancing efficiency, optimizing user experience, and promoting precise matching between supply and demand.
A Profound Understanding of Progress and Achievements
In recent years, major progress has been made in the construction of China's modernized economic system. Not only has the level of productive forces made a major leap—with new quality productive forces already taking shape in practice and demonstrating strong momentum and support for high-quality development—but significant transformations in the relations of production have also been realized. Comprehensively deepening reform has advanced to deeper levels, the system of the socialist market economy has become more mature and finalized, and the healthy development of China's economy and society has been vigorously promoted.
From the perspective of the production system, not only has the total output grown steadily, but the industrial structure has been continuously optimized, and the quality of development has significantly improved. In 2024, China's Gross Domestic Product (GDP) grew by 5% year-on-year, with the total volume exceeding 130 trillion yuan for the first time. Since the start of the 14th Five-Year Plan, China's economy has withstood shocks such as the pandemic of the century and trade bullying, achieving an average growth rate of 5.5% and maintaining a contribution rate of roughly 30% to global economic growth annually. Meanwhile, the industrial structure has been continuously optimized, and strategic emerging industries have developed rapidly, constantly shaping new drivers and advantages for economic development. For example, the new energy industry has developed rapidly, with key components such as photovoltaic modules and wind turbines accounting for approximately 70% of the global market share. The new energy vehicle (NEV) industry has risen strongly, with export value maintaining high-speed growth. The level of industrial automation and intelligence has increased significantly, with the output and installation of industrial robots leading the world. Furthermore, China has actively advanced its "dual carbon" goals [7], and the level of "greening" in economic development has risen significantly. Scientific and technological innovation has become the core driver of industrial development, and an innovation-driven development pattern is taking shape.
From the perspective of the distribution system, resident income has grown steadily, the income gap has gradually narrowed, and the employment and social security systems have been continuously improved. In 2024, the national per capita disposable income of residents was 41,314 yuan, an increase of 9,125 yuan over 2020. The income gap between urban and rural residents has continued to narrow; in 2024, the per capita disposable income of rural residents was 23,119 yuan, and the urban-to-rural income ratio dropped from 2.56:1 in 2020 to 2.34:1 in 2024. The employment situation has remained stable overall. Since the 14th Five-Year Plan, new urban jobs have remained steady at over 12 million annually, with flexible employment and employment in new business forms becoming important supplements. The social security system has become more complete, with basic old-age insurance covering over 1.05 billion people and the participation rate in basic medical insurance stabilizing at over 95%. The world's largest social security net is being woven tighter and stronger, with groups such as workers in new business forms being gradually included in the system.
From the perspective of the circulation system, infrastructure and circulation networks have been comprehensively upgraded, and the construction of a national unified large market has achieved positive results. China has built the world's largest high-speed railway and expressway networks. Simultaneously, it has basically completed a world-class cluster of ports, with the throughput of Shanghai Port and Ningbo-Zhoushan Port leading the world for many consecutive years. Smart logistics have developed rapidly; in 2024, the volume of express delivery exceeded 170 billion items, ranking first in the world for 11 consecutive years, with rural express delivery coverage exceeding 90%. In recent years, China has accelerated the construction of a national unified large market. Policy documents such as the Opinions of the CPC Central Committee and the State Council on Accelerating the Construction of a National Unified Large Market and the Guidelines for the Construction of a National Unified Large Market (Trial) have been released, effectively breaking down institutional barriers like local protectionism and market fragmentation. The revision and implementation of the Anti-Monopoly Law of the People's Republic of China have promoted the unification of national standards in areas such as property rights protection, market access, fair competition, and social credit. The "delegate power, improve regulation, and upgrade services" (放管服, fàngguǎnfú) [8] reform has achieved significant results, the business environment has continued to improve, and the vitality of market entities has been continuously released. Restrictions on foreign investment access in manufacturing have been "cleared to zero," and the restrictive measures on the national negative list for foreign investment access have been reduced to 29 items.
From the perspective of the consumption system, the scale of consumption has continued to expand, the structure has been continuously upgraded, and new business forms of consumption are flourishing. China possesses an ultra-large-scale market of over 1.4 billion people, with a middle-income group exceeding 400 million, representing enormous consumption potential. In 2024, total retail sales of social consumer goods exceeded 48.3 trillion yuan, firmly maintaining its position as the world's second-largest consumer market. The contribution rate of consumption to economic growth exceeded 50%, becoming the primary driver of growth. In recent years, the trend of consumption upgrading in China has been evident, with rapid development in service consumption such as education, medical care, culture, and tourism, which accounts for an increasing proportion of resident consumption expenditure. Consumers are paying more attention to brand, quality, health, and environmental protection, with strong demand for high-end consumer goods and high-quality services. Digital consumption has grown rapidly, with consumption in fields like smart hardware, digital content, and software services showing significant increases. New business forms such as livestreaming e-commerce, social e-commerce, and instant retail have developed quickly, becoming growth points that lead consumption. Green consumption is surging, with the scale of consumption for green products like NEVs and energy-saving household appliances continuing to expand.
While construction of our country's modernization economic system has achieved remarkable progress, various links still face a number of problems and challenges. Regarding the production system, although industrial categories are comprehensive, many industries remain at the low-to-medium end of global value chains, and key core technologies are subject to external constraints. In terms of the distribution system, while people's living standards have improved, the income distribution gap between different groups, urban and rural areas, and different regions remains relatively large. Regarding the circulation system, infrastructure construction has achieved great feats, but the overall efficiency and level of internationalization of the circulation system are not yet high enough. In terms of the consumption system, we possess the demand advantage of a hyper-scale market, yet the consumption structure, environment, and quality await optimization and upgrading. Simultaneously, the coordination and cooperation between different links still need to be strengthened. For instance, a mismatch between supply and demand exists between the production and consumption systems, where an overcapacity of ineffective supply coexists with a shortage of effective supply in certain industries; structural imbalances also exist between the distribution and consumption systems, as the income gap among residents constrains the elevation of overall consumption capacity to a certain extent. Therefore, building a modernized economic system requires not only focusing on improving the weak links within the production, distribution, circulation, and consumption systems but also emphasizing the strengthening of coordination and cooperation between these various links.
Accurately Grasping the Direction and Path
The modernized economic system is a complex system whose fundamental driving force for evolution is the development of new quality productive forces. Therefore, the key to building a modernized economic system lies in vigorously developing new quality productive forces and constructing new-type relations of production [9] compatible with them.
Adhere to innovation-driven development and improve the modernized production system. Faced with increasingly fierce international competition in science and technology, we must concentrate resources and strength to invest heavily in fields such as semiconductors, artificial intelligence, and biomedicine, promoting the independent controllability of key core technologies and concentrating efforts to break through "chokepoint" [10] technologies. Simultaneously, we must accelerate the industrial application of scientific and technological innovations, promoting the deep integration of technological innovation with industrial innovation. On one hand, we must actively cultivate strategic emerging industries such as new energy, new materials, advanced manufacturing, and electronic information, while proactively positioning future industries such as the metaverse, brain-like intelligence, quantum information, and future networks. Especially for developed regions with a better industrial foundation, higher technological levels, and richer talent resources, efforts should be made to seize the initiative in the new round of scientific and technological revolution and industrial transformation. On the other hand, we must use digital-intelligent and green technologies to transform traditional industries, performing disruptive innovations on original production models to imbue them with high-tech, high-efficiency, high-quality, and green characteristics. We should accelerate the digital, intelligent, and green transformation of industries, utilizing methods such as "Artificial Intelligence +" and "Data Elements ×" [11] to deepen the application of AI, big data, cloud computing, and the industrial internet in power systems, industrial and agricultural production, transport, and building construction and operation, thereby achieving the empowerment of green transformation through digital technology.
Coordinate efficiency and equity, and improve the modernized distribution system. We must persist in taking distribution according to labor as the mainstay while allowing multiple forms of distribution to coexist, and construct an institutional system in which primary distribution, redistribution, and tertiary distribution [12] are coordinated and integrated. On one hand, primary distribution should better reflect the orientation toward knowledge, technology, and human capital to fully stimulate the vitality of various productive factors. We must strengthen property rights protection for all types of productive factors, forming institutional arrangements that clearly define the powers of ownership, possession, control, use, income, and disposal, protecting all types of property rights equally according to law, and improving the mechanism where productive factors participate in distribution according to their contribution. On the other hand, the goals and requirements of common prosperity should be strengthened in redistribution and tertiary distribution. We should improve the tax and social security systems, enhance the precision of transfer payments, and optimize the supply of basic public services in fields such as education, health, and medicine. Importance should be placed on the role of tertiary distribution by improving policies and measures for the development of public welfare and charity, strengthening the institutional construction of modern charitable organizations, and building incentive-compatible tax systems to activate social resources through market-based mechanisms and mobilize the enthusiasm of social subjects. Regarding vulnerable groups facing the digital divide, focused attention should be given through special considerations in transfer payments, social security, and public services.
Implement the "Five Unifications and One Openness" [13] and improve the modernized circulation system. Advancing the construction of a national unified large market in depth is a key lever for improving the modernized circulation system; the basic requirement is "Five Unifications and One Openness." Regarding the unification of basic market institutions, we must improve the property rights protection system, the market access system, the fair competition system, and the social credit system, establishing a system of market operation institutions with unified standards, consistent rules, and coordinated execution. Regarding the unification of market infrastructure, we must strengthen the integrated construction of transportation networks and build smart circulation systems, constructing a unified and interconnected modern circulation network, information exchange channels, and commodity trading platforms nationwide to create a modernized infrastructure system where "hard connectivity" and "soft connectivity" work in synergy. Regarding the unification of the scale of government behavior, we must rationalize the relationship between the government and the market, and between the government and enterprises, strictly following unified market economy laws and regulations to standardize and unify local government procurement, bidding, investment attraction, governance of disorderly competition, and the phasing out of backward production capacity. Regarding the unification of market regulation and law enforcement, we must improve national unified market regulation laws to ensure the consistency of enforcement standards and intensity, reducing the discretionary power of local governments in regulation and enforcement to better maintain market order, promote fair competition, and protect consumer rights. Regarding the unification of factor and resource markets, we must strengthen the construction of a multi-level capital market system, integrate technology trading markets, deepen reforms of the household registration system and land circulation, and improve institutional systems for data collection, transaction, and property rights to break down administrative fragmentation and market barriers, realizing the free flow and efficient allocation of productive factors such as labor, capital, technology, and data on a national scale. At the same time, we must continue to expand opening-up both internally and externally. We should steadily expand institutional opening-up, enhance the liberalization and facilitation of trade and investment, deeply integrate into the global economic system, and promote the efficient connection of domestic and international markets to realize the mutual reinforcement of domestic and international dual circulation.
Attach equal importance to long-term and short-term policies and improve the modernized consumption system. We must coordinate structural reform and cyclical adjustment while emphasizing institutional innovation and the stimulation of market vitality, striving to create a modernized consumption system characterized by benign interaction between supply and demand, and the collaborative advancement of consumption upgrading and social development. From the perspective of short-term policies, focus should be placed on precisely stimulating consumption demand. Through methods such as issuing consumption vouchers and implementing tax and fee reductions, we can directly enhance residents' purchasing power and boost market confidence. We should strengthen support for key industries and vulnerable groups to guarantee basic consumption. Enterprises should be encouraged to stabilize and expand employment, enhancing the sustainability of income through social security subsidies or training subsidies that improve worker skills. From the perspective of long-term policies, focus should be on improving the systems and mechanisms that promote consumption. We must raise residents' income levels, refine the social security system, and strengthen consumption expectations. We should strengthen the construction of the consumer credit system, improve the environment for the development of consumer finance, and innovate financial products and services to meet diverse consumption needs. We must advance the construction of a country strong in quality and brands, expand high-quality supply, and accelerate the formation of new consumption growth points such as new energy vehicles, smart homes, education and medical care, and cultural entertainment and tourism, building a multi-level, multi-field, and diversified consumption supply system. We should actively cultivate new consumption models, expanding emerging fields such as green consumption, shared consumption, and digital consumption, promoting the deep integration of online and offline channels to enhance the level of digitalization and intelligence in consumption. Finally, we must optimize the regional layout of consumption, combining it with urban-rural integrated development to stimulate consumption potential at the county level, promoting the downward extension of high-quality consumption resources to improve the convenience and quality of rural consumption, and constructing a more balanced and coordinated consumption pattern.
(The author is a specially invited researcher at the CASS Research Center for Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era and Vice President of the Chinese Academy of History)