Guo Chunli: New Development Pattern Supports the Steady and Sustained Growth of China's Economy
The proposals for the 15th Five-Year Plan suggest promoting the formation of an economic development mode characterized more by domestic-demand leadership, consumption-driven dynamics, and endogenous growth. This is a major strategic deployment based on transformations in China’s developmental stage and environment, aligning with the laws of development for large economies and the new trends in China's economic progress. It serves as an important pillar for continuing the "two miracles" of rapid economic growth and long-term social stability, while ensuring that Chinese-path modernization advances with stability and longevity. We must deeply understand the importance and urgency of forming this new economic development mode from a strategic height and comprehensively and systematically implement the decisions of the Party Central Committee to lay a solid foundation for winning new competitive advantages in the future.
Importance and Urgency Increasingly Apparent
General Secretary Xi Jinping has pointed out that the defining characteristic of a large-sized economy is that domestic demand is the leader and the internal cycle is sustainable. Currently, the momentous changes unseen in a century are accelerating, the international situation is undergoing profound evolution, and uncertain, unpredictable factors are increasing. Within the domestic macro-circulation, "bottlenecks" and "blockages" still exist, and insufficient effective demand has become the primary factor constraining economic development. Against this backdrop, adjusting the economic development mode in response to situational changes—placing greater emphasis on domestic-demand leadership, consumption-driven dynamics, and endogenous growth—is not only conducive to China's ability to cope with external risk shocks and firmly grasp the initiative of development, but is also an inevitable requirement for maintaining economic vitality and competitiveness.
This is a strategic choice to effectively respond to external risks and challenges. Presently, the momentum of world economic growth remains insufficient, geopolitical conflicts are frequent, and the international economic and trade order is facing severe challenges, with protectionism and unilateralism on the rise. The World Trade Organization predicts that the growth rate of global trade in goods will drop from 2.4% in 2025 to 0.5% in 2026, significantly below the historical average. The pressure of contracting external demand continues to intensify, bringing many uncertainties to the development of China's foreign trade. Simultaneously, a new round of scientific and technological revolution and industrial transformation is achieving accelerated breakthroughs. Competition among nations focused on frontier fields such as artificial intelligence, high-end manufacturing, and new energy is becoming increasingly fierce, further highlighting the complexity of great power games. In a complex and grim external environment, a development mode that relies excessively on external demand is easily affected by international market fluctuations, geopolitical conflicts, and other external factors, making it difficult to guarantee the stability and sustainability of economic development. China possesses an ultra-large-scale market of over 1.4 billion people; its domestic demand potential is immense, capable of forming stronger economies of scale, economies of scope, and innovation spillover effects. This is the core characteristic that distinguishes China from small and medium-sized economies reliant on external cycles, and it is the solid basis for our confidence in dealing with external risks. Firmly implementing the strategy of expanding domestic demand to form a domestic-demand-led development mode—using the stability of the domestic market to hedge against the uncertainty of external demand—is China’s strategic choice for enhancing the economy’s resilience against external shocks.
This is an inherent requirement for promoting high-quality development. The key to high-quality development is the transformation of the economic development mode from factor-driven to innovation-driven; this shift is, in essence, a systemic upgrade of the growth paradigm. Currently, China has generally moved from a stage of incremental population development to a stage of reductive development [1]; the speed of capital accumulation is gradually slowing, and resource and environmental constraints are tightening, making the traditional factor-driven mode unsustainable. Meanwhile, China's per capita GDP has exceeded $13,000, and the structure of demand is undergoing profound changes. The investment structure is shifting from primarily investing in "things" to investing more in "people," and the resident consumption structure is shifting from survival-oriented to development- and enjoyment-oriented. Promoting the formation of an economic development mode more focused on domestic demand, consumption, and endogenous growth is not simply about expanding the scale of domestic demand. Rather, it is about following the trend of demand structure upgrading, promoting investment and development-oriented consumption (such as education) that serve people, and increasing the rate of human capital accumulation. This will realize the shift from relying on the "demographic dividend" to the "talent dividend," forming a virtuous cycle of "demand structure upgrade — human capital accumulation — enhancement of economic development quality."
This is the prerequisite and foundation for smoothing the national economic cycle. The key to the national economic cycle is the dynamic balance between supply and demand; the smooth connection of production, distribution, circulation, and consumption is the prerequisite for the sustained and healthy development of the economy and society. Currently, the contradiction of "strong supply and weak demand" in China is prominent, and insufficient domestic demand—especially consumption demand—is a conspicuous shortcoming. Insufficient domestic demand leads to oversupply and idle capacity, which must be addressed practically. The new economic development mode emphasizes using demand as a lead to drive the precise adaptation of the supply system to the demand structure. This is conducive to forming a higher-level dynamic balance where demand pulls supply and supply creates demand. On one hand, the expansion and structural upgrade of domestic demand can guide enterprises to increase R&D investment, improve supply quality and efficiency, and promote industrial transformation and upgrading. On the other hand, innovation breakthroughs on the supply side can continuously give rise to new consumption, new business forms, and new models, expanding the space for domestic demand growth and realizing mutual promotion and a virtuous cycle between supply and demand.
Grasping the Laws of Development and Inner Characteristics
Forming an economic development mode led by domestic demand, driven by consumption, and sustained by endogenous growth is a universal law of development for large economies. It is also an inevitable trend as China's economy reaches a certain stage, possessing objective regularity and historical necessity, while exhibiting rich internal characteristics.
Domestic-demand leadership is a universal law when a large economy reaches a certain stage. When a large economy develops to a certain point, it must achieve a profound transformation from reliance on external demand to domestic-demand leadership. After the per capita GDP of developed countries exceeds $10,000, the characteristic of economic growth relying on domestic demand becomes more pronounced. Since the Reform and Opening-up, China has rapidly integrated into economic globalization and participated in the international macro-circulation, creating a world-renowned miracle of rapid economic growth. Since 2010, China’s total economic volume has remained the second largest in the world, and it possesses the world's most potential-rich ultra-large-scale market. A strong domestic market is the inherent advantage of a large economy. Domestic demand has gradually become the main driver and "stabilizing anchor" for economic growth; from 2013 to 2024, the average contribution rate of domestic demand to economic growth reached 93.1%. Of course, domestic and external demand are not in a zero-sum, substitutive relationship. Domestic demand is the fundamental foothold of economic development; the smoother the domestic cycle, the more it can form a "gravitational field" for global resource elements. Simultaneously, opening up to the outside world plays an important role in improving economic efficiency, converting growth drivers, and optimizing the economic structure; external demand remains an important impetus for economic development. We must persist in coordinating the expansion of opening up with the deepening of reform, better connecting domestic and international markets, and achieving virtuous interaction between domestic and external demand within a higher level of opening up.
Consumption-driven dynamics represent the evolutionary direction of the development mode for large economies. Consumption is the result of economic development, its driver, and the most critical part of domestic demand. Observing the economic history of many countries reveals that the consumption rate—a key indicator of the role of consumption in economic development—exhibits a "U-shaped" trend as development stages change. In the early stages of a country's development, the consumption rate is high but consists of survival-oriented consumption. During the period of rapid industrialization and urbanization, large-scale investment often suppresses the growth of the consumption rate temporarily. However, once large-scale construction is completed, the consumption rate enters an upward channel again. A consumption-driven economy is the common direction for the evolution of economic development modes across countries, a point particularly striking in large economies. Internationally, when per capita GDP reaches above $10,000, the pulling effect of consumption on the economy strengthens rapidly, while the pulling effect of investment continues to decline. For example, after Germany and Japan reached a per capita GDP of $10,000 in 1979 and 1981 respectively, their final consumption rates rose continuously, and their economic growth modes underwent a major shift from investment-led to consumption-driven. In recent years, China’s economic development mode has also been shifting from investment-led to consumption-driven. From 2013 to 2024, the average contribution rate of final consumption expenditure to economic growth reached 55%, which was 16.9 percentage points higher than the average contribution rate of total capital formation during the same period. In 2019, China's per capita GDP exceeded $10,000 for the first time. During the 14th Five-Year Plan period, the average contribution rate of final consumption expenditure to economic growth reached about 60%, an increase of about 10 percentage points over the 13th Five-Year Plan period. The role of consumption as the "main engine" of economic growth has become further highlighted. Of course, consumption and investment are not in a binary opposition. Consumption is the final demand, while investment represents current demand and future supply. Whether investment can match consumption is the key to sustained, stable, and healthy economic development. We must adapt to the trend of consumption upgrading, identify the intersection points between investment and consumption, promote their virtuous interaction, and strengthen the foundational role of consumption in economic development and the key role of investment in optimizing the supply structure.
Endogenous growth is the effective path for the sustained development of large economies. The sustained, stable growth and high-quality development of a large economy have never relied on external forces, but rather on the endogenous momentum of the total supply and demand systems as they constantly adapt through dynamic adjustment, upgrade through interaction, and balance within internal and external environments. Innovation plays an important role in driving the "spiral rise" process of leading new supply with new demand and creating new demand with new supply. Economic growth theory indicates that increased labor input, capital accumulation, and the improvement of total factor productivity are all important factors promoting economic growth. From the developmental history of developed economies, the early and middle stages of industrialization primarily relied on capital and labor inputs to drive growth, whereas in the middle and late stages, the primary driver shifted toward total factor productivity. Currently, China has entered the late stage of industrialization. Economic growth is shifting from reliance on traditional factor inputs like labor and capital toward being driven by technological innovation; the improvement of total factor productivity is becoming the main driver of growth. China's innovation capacity and level are also continuously rising. In 2024, R&D input intensity reached 2.68%, exceeding the average level of EU countries. In 2025, China's innovation index ranked 10th globally. This provides a solid foundation for new supply creating new demand and new demand leading new supply, while injecting lasting momentum for economic development to rely more on endogenous growth.
Uphold Systemic Concepts to Enhance Development Vitality
Standing at a new starting point and focusing on the formation of a new economic development mode, we must coordinate supply and demand, balance the immediate and the long-term, and weigh investment against consumption. Furthermore, we must innovate policy tools and methods, master the intensity and rhythm of policy, improve the efficiency of macroeconomic governance, and continuously strengthen the impetus for development and social vitality.
Persist in the close integration of investing in "things" and investing in "people" to focus on expanding effective investment. We should pay attention to both capital investment and the construction of the investment environment, accelerate the improvement of long-term investment mechanisms, maintain reasonable growth in investment, and improve investment efficiency. On one hand, we must focus on optimizing the investment structure. Adapting to the optimization of regional economic layouts and changes in population structure and flow, we should optimize the layout of infrastructure and public service facilities such as education and medical care. Focusing on the urgent problems that worry the masses [2], we should strengthen investment in social livelihood fields such as basic education, elderly care facilities, and housing security. Adapting to the trend of consumption upgrading, we should increase investment in the development of new consumption scenarios and promote the upgrading of facilities for culture, tourism, and sports. On the other hand, we should focus on stimulating the vitality of private investment. Further dismantle the invisible barriers to private investment, and clear "bottlenecks," "difficulties," and "pain points" in areas such as market access, factor acquisition, fair law enforcement, and rights protection. Systematically plan policy measures to promote private investment and improve long-term mechanisms for private enterprises to participate in major project construction. Implement the requirements of the Private Economy Promotion Law, solidly carry out special actions to regulate law enforcement involving enterprises, and stabilize the policy expectations and development confidence of private enterprises. At the same time, maximize the structure of government investment, strengthen the systemic integration of "hard investment" (infrastructure) and "soft construction" (institutional/human capital), and promote high-quality implementation of major national strategies and capacity-building projects in key areas of security. Strengthen the constraints on government investment decision-making, enhance whole-process management, and improve the efficiency of government investment.
Persist in the close integration of improving people's livelihoods and promoting consumption to better boost consumption. Accelerate the refinement...
A policy environment characterized by the "ability to consume," "courage to consume," and "willingness to consume" must be created to improve long-term mechanisms for expanding consumption and fully unleash the consumption potential of urban and rural residents. First, we must focus on strengthening the consumption capacity of residents. We should coordinate efforts to promote employment, increase income, and stabilize expectations; deeply implement the employment-first strategy; improve employment promotion mechanisms; and construct an employment-friendly development model to promote high-quality full employment for key demographic groups. We must implement plans to increase the income of urban and rural residents, effectively raise the income of low-income groups, and steadily expand the size of the middle-income group. Second, we must continuously eliminate the anxieties that inhibit consumption [3]. We should rationally increase the proportion of public service expenditures within total fiscal expenditure, steadily advance the equalization of basic public services, and improve the systems for education, childcare, elderly care, housing, and medical security. We should appropriately increase basic pensions for retirees, raise the basic pension for urban and rural residents, increase fiscal subsidy standards for urban and rural resident medical insurance, and improve residents' consumption expectations. Third, we must create an environment conducive to the willingness to consume. This involves expanding the supply of high-quality consumer goods and services, cultivating new growth points in service consumption, promoting the expansion and upgrading of commodity consumption, and creating a batch of new consumption scenarios with broad reach and high visibility. We must clear away irrational restrictive measures on consumption in areas such as automobiles and housing, establish and improve management methods adapted to new business forms, models, and scenarios of consumption, strengthen the protection of consumer rights and interests, and create an excellent consumption environment.
We must persist in the close integration of scientific and technological innovation with the deepening of reform to stimulate endogenous growth drivers. Reform and innovation are the fundamental driving forces of economic and social development, and they are the key measures for promoting the formation of a new economic development model. We must deeply implement the innovation-driven development strategy, accelerate high-level self-reliance and self-strengthening in science and technology [4], promote the deep integration of scientific and technological innovation with industrial innovation, and create new demand through new supply. Highlighting a demand-oriented approach, we must strengthen the integration of research and application, improve the new-type whole-nation system [5], coordinate the construction of national strategic scientific and technological forces, and strengthen the strategic, forward-looking, and systematic layout of basic research. We must make every effort to achieve breakthroughs in key generic technologies, frontier leading technologies, modern engineering technologies, and disruptive technological innovations. We must reinforce the guiding role of the market in the direction of R&D and the choice of technical routes, leverage the government's role as an organizer of innovation and a creator of the ecosystem, build an open innovation ecosystem with global competitiveness, and promote the clustering of innovation resources toward enterprises. At the same time, we must better utilize the leading role of economic structural reform, deepen reforms in key areas such as the market-based allocation of factors [6] and integrated urban-rural development, advance the construction of a national unified large market in depth, and improve the macroeconomic governance system to form an economic order that is both "dynamic" and "well-regulated" [7]. We must expand high-level opening up to the outside world, further broaden the space for two-way investment cooperation, and promote the innovative development of trade, thereby enhancing the linkage effects between two markets and two types of resources [8].
(The author is the Vice President of the Academy of Macroeconomic Research of the National Development and Reform Commission) Source: Economic Daily (January 22, 2026) Web Editor: Huihui