New-Quality Productive Forces: Insights from Ex-Chongqing Mayor Huang
Qifan Huang argues that traditional factors like resources, currency, and labor are unsustainable, and outlines the era’s "five major household items"
Qifan Huang 黄奇帆, former mayor of southwest China’s Chongqing and now the Executive Deputy Directors of China Institute for Innovation & Development Strategy, delivered a speech titled “New Achievements and New Tasks in China's Reform, Opening-up, and Innovation under the New Paradign” on November 21, 2024, in Hefei of east China’s Anhui Province.
In his address, Huang shared his latest observations and reflections on “new-quality productive forces,” which was introduced by Chinese President Xi in late 2023.
Key Points:
Why Have China's Traditional Three Production Factors—Resources, Currency, and Labor—Reached a Turning Point?
What Are New-Quality Productive Forces, and What Are the Directions for Their Development?
The following is my English translation of a transcript recorded by Yuan News (元新闻) under the Anhui Daily Press Group. All bolded text was added by Yuan News.
新格局下中国改革开放创新的新成效、新任务
New Achievements and New Tasks in China's Reform, Opening-up, and Innovation under the New Paradign
On the afternoon of November 21, 2024, Huang Qifan, Academic Advisor of the China Finance 40 Forum, Executive Vice Chairman of the Academic Committee of the National Innovation and Development Strategy Research Association, and former Mayor of Chongqing, delivered a speech in Hefei titled "New Achievements and New Tasks in China's Reform, Opening-up, and Innovation under the New Pattern." In his speech, Huang Qifan shared his latest observations and reflections on "new-quality productive forces," saying:
"Twenty years from now, the competition between us in Anhui and Shanghai may not be over the LCD panels, televisions, laptops, or cars of the previous generation. Instead, we will be competing for the 'five major new-quality productive forces' that will enter households in the future."
I. China’s turning point in production factors
The third topic I would like to discuss today is the "new quality productivity forces" proposed by the central government. Advancing new quality productivity forces is an inherent, inevitable, and the only choice for China's sustainable and high-quality development.
Over the past four decades, China's GDP has grown from 1% of the global total to 20%, with the total GDP rising from $200 billion to nearly $18 trillion, a 90-fold increase. This is the result of the reform and opening-up policies, China's comparative advantage in labor, and the benefits of its institutional reforms.
Throughout this process, economic and productivity growth have been driven by production factors -- resources, currency, and labor force.
However, the investments in these three factors over the past four decades have been immense, so much so that relying exclusively and entirely on them for continued growth is no longer sustainable.
Why?
Let’s begin with resources. In recent years, China has consumed half of the world’s mineral resources annually. Globally, 2.5 billion tonnes of mineral resources are used each year, and China accounts for over 1.2 billion tonnes of that total. For example, while the world consumes 380 million tonnes of iron ore annually, China alone uses 190 million tonnes. This iron ore is used to produce 130 million tons of crude steel and 120 million tons of finished steel.
Looking ahead, if China’s GDP were to double in the next 20 years, with the industrial structure and consumption patterns remaining unchanged, it would need to consume all of the world’s resources, leaving nothing for other countries. Is that reasonable?
No, it’s neither reasonable nor possible.
Therefore, in the "14th Five-Year Plan," China set a clear target: By 2035, energy and resource consumption per unit of industrial output should be reduced by one-third, reaching the average level of developing countries. By 2050, China aims to match the average resource and energy consumption per unit of industrial output seen in developed nations. Currently, China's resource consumption is more than double that of developed countries, making it imperative to reduce this by half.
Therefore, today’s model of resource consumption is unsustainable. To resolve this issue, it is essential to promote new quality productivity forces, as it represents a form of productivity that consumes relatively fewer resources.
Next, let’s look at currency consumption. Since China issued its first RMB in 1948, it took 65 years until 2013 to accumulate 100 trillion M2 (M2 refers to the total money supply in circulation). From 2013 to 2020, in just seven years, it increased by another 100 trillion, and from 2020 to early this year, another 100 trillion was added, bringing the total to 300 trillion.
In the past two decades, an annual increase of 10 trillion M2 would drive GDP growth by several percentage points, push up the stock market, boost real estate, raise people’s incomes, and increase both consumption and commodity prices.
However, the situation has changed. Now, even with an annual increase of 20 trillion in M2, much of this money, tens of trillions, ends up in people's deposits, leaving stock prices, housing prices, incomes and consumption stagnant. Therefore, the money supply is circulating more slowly, and the marginal effect of currency expansion has greatly diminished.
In other words, the reliance on currency expansion to drive economic growth has reached its turning point. Over the next decades or even century, while monetary expansion will continue, it will no longer be driven by large-scale increases as in the past. Future economic growth should depend on innovation such as new quality productive forces.
Finally, let’s consider population growth. From 1950 to 1980, China’s population increased by 400 million over 30 years; from 1980 to 2020, it grew by nearly another 400 million. Over these 70 years, China’s population grew by 800 million, contributing to China's labor force advantage.
However, since 2010, China's population has begun to decline. Last year, China's birth rate was approximately 8.9 million. With the current average life expectancy at 78 years—rounded to 80 for simplicity—let's project China's population eighty years from now.
Under the most ideal circumstances, eighty years from now, all the 1.4 billion people in China wouldn’t be on this planet. Concurrently, with an annual birth rate of 9 million over these eighty years and assuming all newborns survive without any accidents, China's total population would amount to 720 million after eighty years.
This means, by that point, China could see a decrease from its current 1.4 billion to 720 million—a highly probable scenario. Therefore, relying on unlimited labor input to drive GDP growth is no longer feasible for China.
These three turning points demonstrate the central government’s foresight. The inherent value of new-quality productive forces lies in their ability to address the challenges posed by the shifts in China’s production factor inputs.
II. What are the "five major household items" of the New Era?
So, what exactly is new-quality productive forces? In my view, the key is to focus on three "fives."
The first "five" refers to the five major sectors of new-quality productive forces.
Not all industries qualify as new-quality productive forces. In human society, these forces are primarily manifested in five key sectors:
New Energy
New Materials
Digital and Intelligent Sectors (digitalization, informatization, and intelligence)
Biomedicine
High-end Equipment
Every era has its own form of new energy. Three hundred years ago, new energy was coal and the steam engine, which led to mechanization—this was the new-quality productive forces of that time. One hundred and fifty years ago, the new energy was petroleum and the internal combustion engine, which led to electrification—this was the new-quality productive force of that time.
Similarly, today's new energy sector focuses on replacing traditional petrochemical energy with clean energy, which drives the new-quality productive force of a new era.
Likewise, the other four sectors are also evolving in the same way. Every era has these key sectors that drive the new-quality productive forces of that period.
Each era follows this pattern.
These five sectors are like five towering trees, each with multiple trunks, branches, and smaller twigs and leaves. As they spread out, they form a vast, dense network of industries within society.
Breaking these five sectors down further, they align with the nine strategic emerging industries introduced in the central government’s "14th Five-Year Plan" (including next-generation information technology, biotechnology, new energy, new materials, high-end equipment, new energy vehicles, environmental protection, aerospace, and marine equipment), as well as the six future industries (such as brain-inspired intelligence, quantum information, genetic technology, future networks, deep-sea and aerospace development, hydrogen energy, and energy storage). All of these can be grouped under the above-mentioned five major sectors.
Therefore, research and development investments, as well as disruptive innovation, must be focused on the guiding directions shaped by these five sectors.
The second "five" refers to the five levels of disruptive innovation in new-quality productive forces.
Theoretical Disruptive Innovation
Technological Disruptive Innovation
Process and Craft Disruptive Innovation
Tool-related Disruptive Innovation
Factor-related Disruptive Innovation
I won't go into the detailed explanations here, but to illustrate the tool-related level: tools such as microscopes enable the exploration of microscopic technologies, sciences, and experiments; telescopes facilitate the study of celestial bodies and the universe; lithography systems allow for the production of advanced 7nm, 5nm, or 3nm chips.
The third "five" signifies that each era's new-quality productive forces not only revolutionize production systems and industrial structures but also permeate households, becoming the "five major household items" in people's daily lives.
During the First Industrial Revolution, mechanization as the new-quality productive forces led to the creation of "five major household items," which included the watch, sewing machine, camera, bicycle, as well as the piano, and phonograph. These devices, composed of numerous gears and mechanical components, may seem simple by today’s standards but were considered highly advanced products and technologies at the time.
During the Second Industrial Revolution, electrification became the driving new-quality productive forces, resulting in the five major household items of that era: the automobile, refrigerator, washing machine, air conditioner, and television. These products spread from Europe to America and eventually to households worldwide, becoming essential staples in daily life.
During the Third Industrial Revolution in 1960s and 1970s, informatization emerged as the new-quality productive forces, introducing five major household items: the large mobile phone (often referred to as the "mobile brick"), the compact mobile phone, personal computers (PCs), desktop computers, and laptops, along with devices like fax machines and printers.
In the era of Artificial Intelligence, intelligence serves as the core of new-quality productive forces, leading to the introduction of advanced robots into households. This evolution encompasses five primary types of robots:
Humanoid Robots: Equipped with hands and feet, these robots function as household nannies, engage elderly individuals in activities such as playing cards, assist children with reading, and handle other household duties.
Professional Assistant Robots: These robots act as secretaries for professionals, transforming current general AI models into specialized assistants with specific expertise.
AR/VR-Based Interactive Robots: With advancements in brain-machine interfaces, augmented reality (AR) and virtual reality (VR) headsets and glasses will evolve into interactive terminal robots. Wearing these devices will render traditional gadgets like phones and computers obsolete, enabling seamless integration between thoughts and robotic responses.
Autonomous vehicles: Autonomous vehicles will be regarded as robots, utilizing their four wheels as equivalent to two hands and feet.
Tool-Based Robots: Homes will be equipped with toolboxes containing 3D-printed robots and other artificial tools.
What I want to say is that the new-quality productive forces of the new era—the “five major household items”—are already coming into existence.
Please note: In twenty years, the competition between regions such as Anhui and Shanghai will no longer revolve around the previous generation's LCD panels, televisions, laptops, or cars. Instead, the rivalry will focus on the "new-quality productive forces" entering households—the "five major household items" of the future. These five items are illustrative; there may be six, seven, or more. Each major item represents trillions of RMB—ranging from 5 trillion to 10 trillion RMB—and potentially scaling to 5 trillion or 10 trillion USD on a global scale. Future global competition will center on these major items.
China now has a vast production capacity in the major items from the First, Second, and Third Industrial Revolutions. The original innovations for these items came from Europe and America, and China followed, organizing production.
During the Third Industrial Revolution, China lagged in the initial stages but caught up in the later phases. In the Fourth Industrial Revolution, China is now advancing in full synchronization with Europe and the United States.
So, twenty years from now, if we look back and find that in these "five major household items" China remains merely a follower—where others innovate first and we only organize mass production—it would mean we have failed the era.
If, in twenty years, China leads in two or three of the new "five major household items" with Europe and America following, while China follows in the remaining areas, it will demonstrate that China has fulfilled its responsibilities. This outcome aligns with the primary trajectory for developing new-quality productive forces. Enditem