Xia Jiechang: Striving to Promote the High-Quality Development of the Real Economy
In the process of comprehensively embarking on the new journey of building a modern socialist country, correctly understanding the status and role of the real economy, fully leveraging its key role in high-quality development, addressing its developmental shortcomings, and exploring conceptual measures and practical paths for its high-quality development are of profound theoretical significance and era-defining value for our efforts to comprehensively advance the great rejuvenation of the Chinese nation through Chinese-path modernization.
Expanding the Real Economy is an Inherent Requirement of Chinese-path Modernization
The real economy is the direct manifestation of social productive forces, the bedrock of modern economic operation, the foundation of human social production and development, and a key support for China’s realization of socialist modernization. Although Marx did not explicitly propose the concept of the "real economy," his discourse from the perspective of the theory of value actually elucidated its profound connotations. Marx believed that "for life, one first requires food, drink, housing, clothing, and several other things. Thus, the first historical act is the production of the means to satisfy these needs, that is, the production of material life itself." From this Marxist logic, we can define the real economy as the sum total formed by production based on natural material inputs and relations of production based on value entities.
Since the 18th National Congress of the CPC, the CPC Central Committee with Comrade Xi Jinping at its core has attached great importance to the development of the real economy, emphasizing repeatedly that resources and factors of production must be concentrated in the real economy. At the Central Economic Work Conference held in December 2016, General Secretary Xi Jinping clearly pointed out: "Revitalizing the real economy is the primary task of supply-side structural reform; supply-side structural reform must exert its force and focus its energy on revitalizing the real economy. No matter the stage of economic development, the real economy remains the foundation of China’s economic development and the basis for us to gain the initiative in international economic competition. Our economy made its name through the real economy, and it must rely on the real economy to move toward the future." In the report to the 20th National Congress of the CPC, General Secretary Xi Jinping noted: "We must persist in placing the focus of economic development on the real economy, promote new-type industrialization, and accelerate the construction of a manufacturing powerhouse, a quality powerhouse, an aerospace powerhouse, a transport powerhouse, a network powerhouse, and a Digital China." These important discourses provide directional guidance and a fundamental follow-back [1] for how we achieve high-quality development of the real economy.
Currently, China has embarked on a new journey to comprehensively build a modern socialist country and advance toward the Second Centenary Goal [2]. Concentrating strength on socialist modernization requires the use of science and technology to comprehensively transform the material basis and spiritual conditions of our production and existence. This places higher demands on production based on material means and relations of production based on value entities. This requires a powerful real economy to serve as a strong support. Without the material means of production provided by the high-quality development of the real economy, socialist modernization would be impossible to speak of. Only when the real economy is expanded and developed can it provide abundant means of production and consumer goods for socialist modernization. From this perspective, expanding the real economy is not only the starting point and ultimate goal of achieving Chinese-path modernization but is itself an inherent requirement to ensure its success. The precious practice of China’s socialist modernization and the industrialization experience of developed countries demonstrate that the real economy is the foundation of modern economic operation and an important guarantee for gaining the initiative in international economic competition. This declares to us that the high-quality development of the real economy must be placed in the highest priority position at all times.
The Prominent Shortcomings in the Development of China’s Real Economy Cannot Be Ignored
After more than 40 years of rapid development since the reform and opening up, China's economic scale has risen to second in the world. It possesses every industrial category listed in the UN industrial classification. Industrialization and informatization have developed deeply, and economic strength has continuously increased, achieving remarkable success that has caught the world’s attention. In particular, manufacturing—the core of the real economy—has developed rapidly. The value added of China's manufacturing industry increased from 16.98 trillion RMB in 2012 to 31.4 trillion RMB in 2021, its share of the global total rising from 22.5% to nearly 30%, further consolidating China's status as the world's leading manufacturing power. However, in key core technological fields of the real economy, "stranglehold" [3] phenomena still exist. To promote the development of the real economy and consolidate the foundation of Chinese-path modernization, we must attach great importance to the current key shortcomings existing in its development.
The phenomenon of "stranglehold" problems in key core technologies remains. Manufacturing is the foundation of a nation and the basis for its strength. After 40 years of development since the reform and opening up, China has become the world’s largest manufacturing nation, possessing a complete industrial chain and mature industrial supporting systems. However, in key core technological fields such as high-end equipment manufacturing, biotechnology, aero-engines, semiconductor chips, industrial mother machines [4], and digital hardware and software, the shortcomings are still relatively obvious. Against the backdrop of a weak global economic recovery, the rise of trade protectionism, and the deep restructuring of global industrial and supply chains, these weaknesses can easily become factors that restrict the security, stability, and autonomous controllability of China’s industrial and supply chains, subsequently bringing negative impacts to the healthy development of China's real economy.
The driving effect of the service industry on manufacturing has not been fully realized. Governed by the laws of modern industrial development, the rising share of the service industry in the national economy and the declining share of manufacturing is an inevitable trend for economic development in all countries. In major developed economies, the service industry's share of GDP is generally higher than that of manufacturing. This is mainly because the service industry, especially producer services, is characterized by high professionalism, active innovation, a high degree of industrial integration, and significant driving effects. By providing intermediate inputs to agriculture and manufacturing, producer services become a key link in accelerating the integrated development of the three industries [5]. However, according to calculations from world input-output tables, China's integration index between the "two sectors" (manufacturing and services) remains relatively low, and a production system for their integration has not yet fully taken shape. This has resulted in the failure to fully realize the "integration-and-pull" effect of the service industry on the real economy.
The proportion of the virtual economy and the real economy is not sufficiently coordinated. The real economy is the source of wealth creation. In the process of economic development, there must also be virtual economy sectors to provide strong support for the real economy, but we cannot develop the virtual economy in isolation or pursue its self-circulation detached from the needs of the real economy. Looking globally, the instances of financial and economic crises triggered by the excessive development of the virtual economy are too numerous to mention. On one hand, when capital becomes detached from the real economy and engages in internal circulation, it amplifies the risk exposure of the financial system, leading to financial crises or "financial tsunamis." On the other hand, the extensive development [6] of the real estate industry has led to the excessive concentration of resources in real estate, distorting the macro-efficiency of resource allocation and even producing negative "wealth demonstration effects," harming the order of economic and social development.
Strategic Path Choices for Advancing the High-Quality Development of the Real Economy
Promoting the high-quality development of the real economy and its continuous expansion is not only a key link in constructing China’s new development pattern but also the foundational support for comprehensively building socialist modernization. Facing the future, we must select and follow the strategic path for achieving high-quality development of the real economy.
First, attach great importance to developing advanced manufacturing. Manufacturing is the foundation of the national economy. In the process of developing the real economy, we must persist in the core status of manufacturing and promote the concentration of production factors in manufacturing, especially advanced manufacturing. At the national level, we must construct a system for tackling "stranglehold" technologies with basic scientific research as the main line. We should leverage the advantages of the whole-nation system [7] to achieve breakthroughs as quickly as possible in key core technological fields such as software development, industrial mother machines, chip manufacturing, and biomedicine. We must establish a national technological innovation and manufacturing support system characterized by the integrated development, orderly connection, and efficient operation of the technology, innovation, and industrial chains. We should further optimize fiscal, taxation, financial, and talent systems, support the innovative development of local industrial parks, incubators, and accelerators, and create a "technology-factory-market" conversion mechanism. We must fully tap the scientific research potential of universities, creating several world-leading advanced manufacturing centers in regions where higher education institutions are concentrated, transport advantages are obvious, the manufacturing base is solid, and links with international consumer markets are close. Supporting the high-quality development of advanced manufacturing enterprises will produce a group of industry leaders and benchmark enterprises, fully leveraging the agglomeration advantages of advanced manufacturing centers and the multiplier effect of leading enterprises to continuously consolidate the foundation of China’s real economy.
Second, fully release the integration effects of the service industry. While we must stress the foundational status of manufacturing, we must not ignore the integration-and-pull effect of service industry development on manufacturing and the whole national economy. We should promote the coordinated development of the three industries while keeping their relative proportions basically stable. In particular, by promoting the "servitization" of manufacturing and service-oriented manufacturing, we can drive the integrated development of manufacturing and services, magnifying the service industry's role. With the innovation of business models and technological progress, the physical boundaries between the three industries are increasingly blurred. Cross-sector integration between services, manufacturing, and agriculture is becoming more common. Through efficient integration with services, manufacturing and agriculture have enhanced production and circulation effects, reduced costs in production, storage, and logistics, and greatly improved the efficiency of the entire production side, while bringing a better consumer experience. This promotes the movement of the entire production and supply curve to a higher level of equilibrium, thereby expanding the real economy.
Third, seize digital technology as the key variable. Human society is entering the digital age. At the technical level, digital technology has already become the dominant force transforming the way human society produces and lives. With the help of advanced algorithms and digital platforms, traditional modes of production and life have been reconstructed. In the economic sphere, the share of the digital economy in the national economy continues to climb, and the impact of the digital economy on existing global economic and trade rules has attracted high attention from major developed countries. As the world's largest developing country, keeping pace with the era's trend of digital technological transformation is a key lever for China to achieve rapid development, enhance international competitiveness, and drive the transformation of global economic and trade rules. On one hand, we must make great efforts to overcome technical difficulties such as semiconductor chips closely related to digital technology and its application, ensuring that core technologies are not controlled by others [8], while also protecting algorithms and paying close attention to digital sovereignty. On the other hand, we should encourage the integrated development of the national economy’s three industries with digital technology, and through digital empowerment, continuously tap the developmental efficiency of these industries. Furthermore, we must actively monitor the dynamics of the new round of global digital economic and trade rule-setting. Through a series of multilateral and bilateral cooperation mechanisms such as the Belt and Road Initiative, the China International Import Expo, and the Regional Comprehensive Economic Partnership (RCEP), we can build an international rule system more conducive to the development of China’s digital economy.
Fourth, pursue higher-level opening up and integration into global markets. China is currently in a key period of "constructing a new development pattern with the domestic cycle as the mainstay and the domestic and international dual circulation promoting each other," and the real economy is the important carrier for constructing this new development pattern. This requires us to better integrate into global markets on the basis of expanding domestic demand and smoothing domestic circulation mechanisms; these are the two wings required for the development of the real economy. By continuing to deepen internal reforms, we can effectively stimulate domestic demand and eliminate institutional mechanisms in the domestic market that are unfavorable to the flow of production factors and products, thereby endowing the real economy with more endogenous power. A better global market will help us fully utilize "two markets and two resources," providing more important factors and markets for the development of the domestic real economy. As China’s economic strength continuously leaps forward, better integration into the international market actually contains two levels of meaning: first, appropriately expanding imports to leverage the attraction of a "super-sized market" for global economic entities, especially in the post-pandemic era of slow global recovery, where the comparative advantage of China's huge market is gradually becoming apparent; second, continuing to encourage Chinese enterprises to "go global" and continuously enhancing the global resource allocation capability of the Chinese economy, which is itself an important channel for improving the developmental capacity of the real economy.
Fifth, optimize a policy system conducive to the priority development of the real economy. Social and economic development cannot happen without the support of fiscal, taxation, financial, and talent policies. Expanding the real economy to realize Chinese-path modernization requires the continuous optimization and dynamic adjustment of supporting policies. As the lifeblood of the real economy, finance should take serving the development of the real economy as its "heaven-sent duty" [9]; financial support for the real economy must persist in this basic principle. In China's current financing system, the indirect financing system dominated by banks remains the main source of financing for market entities. Therefore, the focus and key of financial support for the real economy lie with banks. In this regard, we need to encourage commercial banks to innovate product designs, participate in market competition, and establish regulatory principles oriented toward serving the real economy. We must increase efforts to investigate and punish the "diversion of capital from the real to the virtual" [10] and "idling" [11] of funds within the financial system for arbitrage, truly directing the "living water" of finance toward the real economy to provide sufficient momentum for its development. Supporting the real economy also requires fiscal policy; in the current environment, it is especially necessary to "protect market entities." For example, for private enterprises that contribute more than 50% of national tax revenue, we must take the spirit of General Secretary Xi Jinping's important speech at the Symposium on Private Enterprises as our fundamental follow-back, persist in the "Two Unswervinglys" [12], increase policy support for private enterprises heavily affected by the pandemic, and continuously improve and strengthen the "Six Stabilities" [13] measures. Finally, the development of the real economy requires high-quality human capital as support. We must promote the "spirit of the craftsman," cultivate a high-quality team of engineers through a modern vocational education system, optimize the allocation structure of the human capital industry, and guide talent toward the real economy to enhance the innovative capacity of enterprises, thereby continuously strengthening the endogenous power of the real economy’s development.