Guo Chunli: New Development Pattern Supports the Steady and Long-term Growth of the Chinese Economy
The Proposals for the "15th Five-Year" Plan suggest promoting the formation of more economic development models dominated by domestic demand, driven by consumption, and fueled by endogenous growth. This is a major strategic deployment based on changes in our country's developmental stage and environment, conforming to the laws of development for large economies and the new trends in our national economic progression. It is an important support for writing a new chapter of the "two miracles" of rapid economic development and long-term social stability [1], and for promoting the steady and long-term progress of Chinese-path modernization. We must profoundly understand the importance and urgency of forming a new economic development model from a strategic height, comprehensively and systematically implementing the decisions and deployments of the Party Central Committee to lay a solid foundation for winning new competitive advantages in the future.
The Importance and Urgency are Increasingly Prominent
General Secretary Xi Jinping has pointed out that the characteristics of a large economy are dominance by domestic demand and internal recyclability. Currently, the world's once-in-a-century changes are accelerating, the international situation is evolving profoundly, and uncertain and unpredictable factors are increasing. Within the domestic macro-circulation, "stuck points" and "bottlenecks" still exist, and insufficient effective demand has become a major factor constraining economic development. Against this backdrop, adjusting the economic development model in response to changing circumstances—placing more emphasis on domestic demand dominance, consumption driving, and endogenous growth—is not only conducive to our country's ability to respond to 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. At present, the momentum for 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 shrinking external demand continues to increase, bringing many uncertainties to the development of our country's foreign trade. Simultaneously, a new round of scientific and technological revolution and industrial transformation is accelerating breakthroughs. Competition among nations around frontier fields such as artificial intelligence, high-end manufacturing, and new energy is becoming more intense, and the complexity of major power rivalry is further highlighted. In a complex and severe external environment, a development model that relies excessively on external demand is easily affected by external factors such as international market fluctuations and geopolitical conflicts, making it difficult to guarantee the stability and sustainability of economic development. Our country possesses an ultra-large-scale market of over 1.4 billion people; the potential for domestic demand is enormous, capable of forming stronger economies of scale, economies of scope, and innovation spillover effects. This is a core characteristic that distinguishes us from small and medium-sized economies that rely on external demand cycles, and it is the solid foundation of our confidence in responding to external risks and challenges. Firmly implementing the strategy of expanding domestic demand to form a domestic-demand-dominated development model, using the stability of the domestic market to hedge against the uncertainty of external demand, is our country's strategic choice to enhance its ability to withstand external shocks.
This is an inherent requirement for promoting high-quality development. The key to high-quality development is the shift of the economic development mode from factor-driven to innovation-driven; this shift is essentially a systemic upgrade of the growth paradigm. Currently, our country has transitioned from a stage of incremental population development to a stage of reductive development; the speed of capital accumulation is gradually slowing, and resource and environmental constraints are increasingly tightening. The traditional factor-driven model is unsustainable. Meanwhile, our country's per capita GDP has exceeded $13,000, and the demand structure is undergoing profound changes: the investment structure is shifting from "investing in things" to "investing in people," and the resident consumption structure is shifting from survival-oriented to development-oriented and enjoyment-oriented. Promoting the formation of an economic development model dominated by domestic demand, consumption, and endogenous growth is not simply about expanding the scale of domestic demand. Rather, it is about conforming to the trend of demand structure upgrading, promoting more development-oriented consumption such as investment in people and education, and increasing the rate of human capital accumulation. This facilitates the shift from relying on the "demographic dividend" to relying on the "talent dividend," forming a virtuous cycle of "demand structure upgrade — human capital accumulation — improvement in economic development quality."
This is the prerequisite and foundation for smoothing the national economic circulation. The key to the national economic circulation is the dynamic balance between supply and demand; the smooth connection of production, distribution, circulation, and consumption is the prerequisite for the continuous and healthy development of the economy and society. Currently, the contradiction of "strong supply and weak demand" is prominent, and insufficient domestic demand—especially consumption demand—is a prominent shortcoming. Insufficient domestic demand leads to oversupply and idle capacity, which must be addressed earnestly. The new economic development model emphasizes demand as the lead, promoting 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 of the scale and upgrade of the structure 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 birth to new consumption, new business forms, and new models, expanding the space for domestic demand growth and achieving mutual promotion and a virtuous cycle between the supply and demand ends.
Grasping the Laws of Development and Substantive Characteristics
The formation of an economic development model more dominated by domestic demand, driven by consumption, and fueled by endogenous growth is a universal law of development for large economies. it is also an inevitable trend as our country's economy reaches a certain stage, possessing objective regularity and historical necessity, and exhibiting rich substantive characteristics.
Domestic demand dominance is a universal law once a large economy reaches a certain stage. When a large economy develops to a certain point, it must achieve a profound transformation from relying on external demand to being dominated by domestic demand. After the per capita GDP of developed countries breaks through $10,000, the characteristic of economic growth relying on domestic demand becomes more obvious. Since the reform and opening up, our country rapidly integrated into economic globalization and participated in the international macro-circulation, creating a miracle of rapid economic growth that has attracted worldwide attention. Since 2010, our country's total economic output has remained stable as the world's second largest. We possess the world's most potential-rich, ultra-large-scale market. A powerful domestic market is where the advantage of a large economy lies. Domestic demand has gradually become the main driver and "stabilizing anchor" of economic growth; from 2013 to 2024, the average contribution rate of domestic demand to economic growth reached 93.1%. Of course, domestic demand and external demand are not in a zero-sum relationship of substitution. Domestic demand is the basic foothold of economic development; the smoother the domestic circulation, 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, shifting growth drivers, and optimizing the economic structure; external demand remains an important driver of economic development. We must persist in the synergy between expanding opening up and deepening reform, ensuring better connectivity between the domestic and international markets, and achieving virtuous interaction between domestic and external demand within a higher level of opening up.
Consumption-led growth is the evolutionary direction of the development model for large economies. Consumption is the result of economic development, the driver of economic development, and the most critical part of domestic demand. Observing the economic history of many countries reveals that the "consumption rate"—as an important indicator measuring the role of consumption in economic development—presents a U-shaped trend as development stages change. In the early stages of a country's development, the consumption rate is high but belongs to survival-oriented consumption. Entering the period of rapid industrialization and urbanization, large-scale investment often suppresses the growth of the consumption rate temporarily. Once large-scale construction is completed, the consumption rate returns to an upward trajectory. A consumption-driven economy is the common direction of evolution for all countries' economic development models, a point particularly prominent in the development of 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 both increased continuously, and their economic growth models underwent a major shift from investment-dominated to consumption-driven. In recent years, our country's economic development model has also been shifting from investment-dominated to consumption-driven. From 2013 to 2024, the average contribution rate of final consumption expenditure to economic growth reached 55%, 16.9 percentage points higher than the average contribution rate of total capital formation during the same period. In 2019, our country'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 been further highlighted. Of course, consumption and investment are not in a relationship of binary opposition. Consumption is final demand, while investment is current demand and future supply. Whether investment can match consumption is the key to the continuous, stable, and healthy development of the economy. It is necessary to adapt to the trend of consumption upgrading, identify the junction points between investment and consumption, promote their virtuous interaction, and enhance the "foundational role" of consumption in economic development and the "key role" of investment in optimizing the supply structure.
Endogenous growth is an effective way for the sustained development of large economies. The continuous, 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 system and total demand system as they constantly adapt through dynamic adjustment, upgrade through interaction, and balance within internal and external environments. Innovation plays an important role in promoting the "spiral ascent" process of leading new supply with new demand and creating new demand with new supply. Economic growth theory shows that increased labor input, capital accumulation, and the improvement of total factor productivity (TFP) are all important factors in promoting economic growth. From the developmental history of developed economies, the early and middle stages of industrialization driven economic growth primarily through capital and labor inputs, whereas in the middle and late stages of industrialization, the main factor driving economic growth shifted to reliance on TFP improvements. Currently, our country has entered the late stage of industrialization. Economic growth is shifting from relying on the increased input of traditional productive factors like labor and capital to being driven by technological innovation. The improvement of TFP is becoming the primary driver of economic growth. Our country's innovation capability and level are also continuously improving: in 2024, R&D investment intensity reached 2.68%, exceeding the average level of EU countries; in 2025, the innovation index ranking reached 10th in the world. This provides a solid foundation for new supply creating new demand and new demand leading new supply, injecting lasting momentum for economic development to rely more on endogenous growth.
Upholding Systemic Thinking to Enhance Developmental Vitality
Standing at a new starting point and focusing on forming a new economic development model requires coordinating supply and demand, balancing the present and the long term, and weighing investment and consumption. It also requires innovating policy tools and methods, grasping the intensity and rhythm of policies, improving the efficacy of macroeconomic governance, and continuously enhancing the motivation 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 must emphasize both capital input and the construction of the investment environment, accelerating the improvement of long-term investment mechanisms, maintaining reasonable investment growth, and improving investment efficiency. On one hand, focus on optimizing the investment structure. Adapt to the needs of optimizing regional economic layouts and changes in population structure and migration directions by optimizing the layout of infrastructure and public service facilities such as education and medical care. Focus on the "urgent, difficult, and anxious" problems of the masses, strengthening investment in social and livelihood fields such as basic education, elderly care facilities, and housing security. Adapt to the trend of consumption upgrading, increasing investment in the development of new consumption scenarios, and promoting the upgrade of consumption facilities for culture, tourism, and sports. On the other hand, focus on stimulating the vitality of private investment. Further dismantle the "hidden barriers" to private investment. In terms of market access, factor acquisition, fair law enforcement, and protection of rights and interests, we must clear the "stuck points," "difficult points," and "pain points." Systemically plan policy measures to promote private investment and improve long-term mechanisms for private enterprises to participate in the construction of major projects. 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 developmental confidence of private enterprises. Meanwhile, optimize 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 constraints on government investment decision-making, enhance whole-process management, and improve the efficiency of government investment.
Persist in the close integration of "benefiting livelihoods" and "promoting consumption" to better boost consumption. Accelerate the improvement of...
We must foster a policy environment where people "can afford to consume," "dare to consume," and "desire to consume," improving the long-term mechanisms for expanding consumption and fully stimulating the consumption potential of both urban and rural residents. First, we must focus on enhancing the consumption capacity of residents. This involves coordinating efforts to promote employment, increase incomes, and stabilize expectations, while deeply implementing the employment-first strategy. We should improve employment promotion mechanisms, construct an employment-friendly development model, and facilitate high-quality full employment for key demographic groups. We will implement plans to increase the incomes of urban and rural residents, effectively raising the income of low-income groups and steadily expanding the size of the middle-income group. Second, we must continuously eliminate the "worries that hinder consumption" [2]. This requires reasonably increasing the proportion of public service expenditures within total fiscal spending, steadily advancing the equalization of basic public services, and refining systems for education, childcare, elderly care, housing, and medical security. We should appropriately increase basic pensions for retirees, raise basic pension benefits for urban and rural residents, increase the standards for fiscal subsidies for urban and rural resident medical insurance, and improve residents’ consumption expectations. Third, we must create an environment where people desire 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 unreasonable restrictive measures on consumption in areas such as automobiles and housing, establish and improve management methods adapted to new business formats, models, and scenarios of consumption, strengthen consumer rights protection, and create a favorable consumption environment.
We must persist in the close integration of scientific and technological innovation with the deepening of reform to stimulate endogenous growth momentum. Reform and innovation provide the fundamental impetus for economic and social development and 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 strength in science and technology, and promote the deep integration of scientific and technological innovation with industrial innovation to create new demand through new supply. Highlighting a demand-driven orientation, we must strengthen the integration of research and application, improve the new-type whole-nation system [3], coordinate the construction of national strategic scientific and technological forces, and enhance the strategic, forward-looking, and systematic layout of basic research. We must strive to make breakthroughs in key generic technologies, cutting-edge leading technologies, modern engineering technologies, and disruptive technological innovations. We should strengthen 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 political ecosystem, build an open innovation ecosystem with global competitiveness, and promote the concentration of innovation resources within enterprises. At the same time, we should better leverage the leading role of economic system reform, deepening reforms in key areas such as the market-based allocation of factors and integrated urban-rural development. We must push forward the construction of a national unified large market [4] in depth and refine the macroeconomic governance system to form an economic order that is both "dynamic and unfettered" and "well-regulated" [5]. Finally, we must expand high-level opening up to the outside world, further expand the space for two-way investment cooperation, and promote the innovative development of trade, thereby enhancing the linkage effects of "two markets and two resources" [6].
(The author is the Vice President of the Academy of Macroeconomic Research at the National Development and Reform Commission) Source: Economic Daily (January 22, 2026) Editor: Huihui