Huang Kainan: Accurately Grasping the Characteristics of China's Economic Growth Drivers During the "15th Five-Year Plan" Period
The "Recommendations of the Central Committee of the Communist Party of China on Drawing Up the Fourteenth Five-Year Plan for National Economic and Social Development and the Long-Range Objectives Through the Year 2035" [1] (hereinafter referred to as the "Recommendations"), deliberated and adopted at the Fourth Plenary Session of the 20th CPC Central Committee, proposes: "Significant results shall be achieved in high-quality development. Economic growth shall be maintained within a reasonable range, total factor productivity shall steadily improve, the household consumption rate shall increase significantly, the role of domestic demand as the primary driver of economic growth shall be continuously strengthened, and the potential for economic growth shall be fully released." This constitutes one of the primary objectives for economic and social development during the "Fifteenth Five-Year Plan" period (2026–2030). To achieve a dynamic interaction between the supply side and the demand side, and to realize an effective improvement in the quality of the economy alongside reasonable growth in quantity, China’s economic growth during this period must rely more heavily on the contribution of total factor productivity on the supply side, while continuously strengthening the role of domestic demand as the primary driver on the demand side.
1. Enhancing the Contribution of Total Factor Productivity to Economic Growth
The sources of economic growth primarily consist of two parts: the growth of factor inputs and the growth of total factor productivity. The former is growth driven by factor inputs, while the latter is growth driven by innovation. Currently, enhancing the contribution of total factor productivity to China’s economic growth through innovation-driven development is of increasing importance. Faced with the historical opportunities and challenges brought by the new round of technological revolution and industrial transformation, accelerating the promotion of high-level secondary self-reliance and strength in science and technology, and promoting the development of new quality productive forces, have become vital strategic choices for China.
During the "Fifteenth Five-Year Plan" period, enhancing total factor productivity by accelerating the development of new quality productive forces will be an important source of momentum for China’s economic growth.
First, enhancing total factor productivity through revolutionary technological breakthroughs. Revolutionary breakthroughs in technology can push the frontiers of cutting-edge technology outward, expand production possibility frontiers, and significantly increase total factor productivity. The "Recommendations" make strategic arrangements for "strengthening original innovation and tackling key core technologies." During the "Fifteenth Five-Year Plan" period, we must leverage the advantages of the new-type whole-nation system [2] to concentrate on key problems, coordinate national strategic scientific and technological forces, and harmonize the roles of the effective market and the promising government [3] in the allocation of innovation resources, focusing on organized, full-chain collaborative attacks on key core technologies in critical fields. Original innovation requires increasing investment in basic Research and Development (R&D). Given that the proportion of China’s basic research expendsture within total R&D investment is relatively low, we should further improve the diversified investment mechanism for basic research and increase its share of total investment.
Second, enhancing total factor productivity through the innovative allocation of production factors. The innovative allocation of production factors is a key component in building new relations of production that are compatible with the development of new quality productive forces. Strengthening the protection and application of intellectual property rights can further incentivize scientists and entrepreneurs to engage in technological innovation and accelerate the speed of technological innovation and its application. Establishing and improving a coordination mechanism to advance education, technology, and talent development as a whole can clear the channels for talent exchange between universities, research institutes, and enterprises. It can also support leading science and technology enterprises in forming innovation consorita with universities and research institutions, reinforcing the enterprise-led integration of industry, academia, research, and finance. Improving the basic systems for data factors and building an open, shared, and secure national integrated data market can deepen the development and utilization of data resources and accelerate the deep integration of the physical economy and the digital economy. Actively developing direct financing such as equity and bonds, steadily developing futures, derivatives, and asset securitization, and deepening financial system reform can guide multi-form financial resources to precisely empower technological innovation. Strengthening human resource development and investment, and improving development mechanisms friendly to the accumulation of human capital investment, can facilitate the transition from a quantity-based population dividend to a quality-based talent dividend.
Third, enhancing total factor productivity through deep industrial transformation and upgrading. Deep industrial transformation and upgrading are major catalysts for new quality productive forces. Technological innovation and industrial innovation are the fundamental paths for developing new quality productive forces. By providing high-quality technological supply, strengthening the dominant position of enterprises in technological innovation, and promoting the transformation and application of scientific and technological achievements—while relying on China’s industrial base advantages and ultra-large-scale market advantages—we can accelerate the industrial application of scientific and technological achievements. We will coordinately promote the optimization and upgrading of traditional industries, the cultivation and expansion of emerging industries, and the forward-looking layout of future industries. This will drive deep industrial transformation and upgrading, increase the proportion of enterprises and industries with high technological levels, achieve the transformation and upgrading of the economic structure, and significantly boost total factor productivity.
2. Strengthening the Role of Domestic Demand as the Primary Driver of Economic Growth
Insufficient effective demand, particularly domestic demand, is a difficulty and challenge currently facing economic operations. General Secretary Xi Jinping has emphasized: "We must accelerate the patching of weaknesses in domestic demand, especially consumption, making domestic demand the primary driver and 'stable anchor' of economic growth." During the "Fifteenth Five-Year Plan" period, while persisting in expanding high-level opening up to the outside world, we must continuously strengthen the role of domestic demand as the primary driver of economic growth.
Vigorously boosting consumption and consolidating its foundational role in economic growth. Consumption is both the driver and the purpose of growth; the degree to which household consumption needs are met directly affects the living standards of the people. The "Recommendations" include "a significant increase in the household consumption rate" as one of the primary goals of economic and social development, fully demonstrating that China’s economic growth is shifting more toward benefiting people’s livelihoods and promoting consumption, using consumption upgrading to lead industrial upgrading. During the "Fifteenth Five-Year Plan" period, vigorously boosting consumption is the main driver for expanding domestic demand. We must systematically construct long-term mechanisms to boost consumption from the perspectives of enhancing consumption capacity, strengthening the willingness to consume, and improving consumption conditions.
First, increasing household income. During the "Fifteenth Five-Year Plan" period, it is necessary to accelerate the improvement of the income distribution system and implement institutional mechanisms and policy systems that ensure "household income growth is synchronized with economic growth, and increases in labor remuneration are synchronized with increases in labor productivity." By constructing an employment-friendly development model, improving the minimum wage adjustment mechanism, and implementing the collective wage negotiation system, we can enhance labor quality and productivity, increase the share of labor remuneration in primary distribution [4], and promote reasonable growth in wage income. By stabilizing the stock and real estate markets, improving the regular dividend mechanism for listed companies, enriching financial products suitable for individual investors, improving the distribution mechanism for rural land value-added returns, and revitalizing the utilization of rural housing, we can expand channels for property income and increase the property income of residents. By supporting the development of small and medium-sized enterprises (SMEs) and individual industrial and commercial households, improving the development quality of new-type agricultural management entities, and improving long-term mechanisms for clearing arrears, we can increase the operating income of residents. By improving the fiscal transfer payment system and consumption subsidy policies, and increasing the intensity of transfer payments for service consumption, we can increase the transfer income of residents.
Second, increasing the proportion of per capita consumption expenditure relative to per capita disposable income. The proportion of per capita consumption expenditure to per capita disposable income in China is not high. During the "Fifteenth Five-Year Plan" period, we need to solve the problem of people "not daring to consume" by improving the social security system; solve the problem of "inconvenient consumption" by innovating consumption scenarios and improving consumption conditions; and solve the problem of "not wanting to consume" through high-quality supply. During the "Fourteenth Five-Year Plan" period, the growth rate of per capita consumption expenditure for rural residents has consistently outpaced that of urban residents. In the "Fifteenth Five-Year Plan" period, promoting integrated urban-rural development and narrowing the urban-rural income gap can expand overall consumption expenditure and increase the ratio of per capita consumption.
Third, strengthening the protection of consumer rights and interests. We must improve national standards, create a safe and secure consumption environment, and further improve a common governance system for consumer rights protection that combines business compliance, industry self-discipline, consumer participation, government supervision, and social oversight, thereby improving the convenience, comfort, and satisfaction of consumption.
Expanding effective investment and giving full play to the key role of investment in stabilizing growth and adjusting structure. Investment is not only an important component of domestic demand but can also form the key productive forces that drive economic growth and structural transformation. Effective investment refers to high-quality investment that is profitable and efficient. During the "Fifteenth Five-Year Plan" period, expanding effective investment requires maintaining reasonable growth in the scale of investment while focusing on improving investment returns and efficiency.
First, gross fixed capital formation must maintain a reasonable growth rate. During the "Fifteenth Five-Year Plan" period, although the driving force of factor inputs is weakening, China’s economic growth still needs to maintain a certain rate of investment growth. The expansion of the total volume and the improvement of the quality of gross fixed capital formation remain critical to China’s economic growth and transformation. The structure of fixed asset investment needs further optimization. We must accelerate the promotion of high-quality development in the real estate sector and facilitate a continuous narrowing of the decline in real estate investment to keep its share within a reasonable range. By constructing a modern industrial system with advanced manufacturing as the backbone, and establishing and improving mechanisms for investment in a reasonable proportion of manufacturing, we can promote the reasonable growth of manufacturing investment. By constructing a modern infrastructure system—appropriately advancing the construction of new infrastructure, promoting the renewal and digital-intelligent transformation of traditional infrastructure, improving the modern comprehensive transportation system, and accelerating the construction of new energy infrastructure—we can ensure that infrastructure investment maintains reasonable growth.
Second, focusing on improving investment returns. Without investment efficiency, boosting consumption is difficult to sustain; similarly, without consumption growth, improving investment efficiency is also difficult to achieve. Consumption is "past investment," and investment is "future consumption." During the "Fifteenth Five-Year Plan" period, we need to focus on improving investment returns and promoting a virtuous interaction between consumption and investment. We must deepen the construction of a unified national market, accelerate the comprehensive rectification of "involution-style" [5] competition, achieve high quality with fair prices, and enhance the return on high-quality investment. We should guide capital toward fields that meet the upgrading of household consumption demand and the improvement of human capital, promoting the close integration of "investment in things" and "investment in people," so that consumption demand leads fixed asset investment, enhances supply-demand matching, and achieves effective investment. By improving the whole-process management and benefit evaluation mechanisms for government investment, establishing an evaluation system for state-owned enterprises (SOEs) to fulfill their strategic missions, and refining the classified assessment system for SOEs, we can improve the efficiency of government public investment and state-owned capital investment.
Third, steadily improving investment efficiency. Improving investment efficiency means increasing the capital-output ratio, ensuring that the amount of capital required for each additional unit of GDP decreases. Through the cluster development of advanced manufacturing and strategic emerging industries, we can achieve economies of scale and knowledge spillover effects, thereby improving investment efficiency. By developing new quality productive forces according to local conditions and implementing "AI Plus" actions, we can promote the deep integration of the physical and digital economies and improve investment efficiency.
3. Achieving a Virtuous Interaction Between the Supply Side and the Demand Side
General Secretary Xi Jinping has pointed out: "Supply and demand are the two basic aspects of the internal relationship of a market economy; they are a dialectical relationship of both opposition and unity. The two cannot exist without each other; they are interdependent and conditional upon one another. Without demand, supply cannot be realized, and new demand can catalyze new supply; without supply, demand cannot be satisfied, and new supply can create new demand." He further noted: "Looking at the history of world economic development, whether economic policy focuses on the supply side or the demand side depends on a country's macroeconomic situation. Talking about the supply side while abandoning the demand side, or talking about the demand side while abandoning the supply side, is one-sided. The two are not a zero-sum or mutually exclusive relationship of substitution; rather, they must cooperate with each other and be pushed forward in coordination."
The "Fifteenth Five-Year Plan" period is a critical period for laying the foundation and exerting full effort toward basically achieving socialist modernization. We must enhance the contribution of total factor productivity to economic growth from the supply side by accelerating the development of new quality productive forces, and strengthen the role of domestic demand as the primary driver of growth from the demand side by vigorously boosting consumption and expanding effective investment, thereby achieving a virtuous interaction between the supply side and the demand side.
Enhancing total factor productivity is a necessary requirement for strengthening the role of domestic demand as the primary driver of economic growth. Boosting consumption requires increasing the household consumption rate, which to some extent will reduce the household savings rate. Since investment is transformed from savings, a long-term decline in the savings rate will lead to a decrease in the growth rate of capital formation. This necessitates improving investment efficiency to produce more goods and services to meet continuously growing consumption demand. As the population structure changes and the growth rate of the working population declines, it is necessary to improve the efficiency of investment in human capital and promote high-quality population development. Therefore, whether investing in things or in people, investment efficiency must be improved, which inevitably requires enhancing total factor productivity. Due to the declining growth rates of traditional factors such as capital and labor, economic growth must shift from being factor-driven to innovation-driven, relying more on the growth of total factor productivity. Only by enhancing total factor productivity can investment efficiency be improved, providing support for the sustainable growth of consumption. Changes in the growth drivers on the demand side require corresponding changes in the growth drivers on the supply side.
Similarly, strengthening the role of domestic demand as the primary driver of economic growth provides important support for enhancing total factor productivity. Enhancing total factor productivity means that the same factor inputs will produce more products. Whether they are consumer goods or investment goods, the demand for products should rely more on the domestic mega-market. Only in this way can the role of expanding domestic demand as the "stable anchor" of economic growth be better utilized. Boosting consumption and expanding effective investment can expand effective demand, increase capacity utilization, and fully release the economic growth potential brought about by enhancing total factor productivity.
During the "Fifteenth Five-Year Plan" period, we should push forward the construction of a unified national market in depth, clear the "bottlenecks" in the links of production, exchange, distribution, and consumption, and focus on promoting the virtuous interaction between consumption and investment, and between supply and demand.