Vice Premier Liu He, the top economic adviser of Chinese President Xi Jinping, has stressed that China’s pursuit of self-reliance in key technologies is “imperative” to its new economic strategy, which places an increased emphasis on domestic consumption. “This is a critical juncture for the development of a big country’s economy,” Liu wrote in an official guide to Beijing’s new development plan, and he promised that the capital markets would support the drive for technological innovation. Liu’s responsibilities as Vice Premier include science and technology, a critical area in the contest with the United States. In a speech in Shanghai earlier this month, President Xi told the city’s officials that “science and technology have never had such a deep influence over the country’s future and fate as they do today” and concluded that China “needs to strengthen innovation as its No 1 growth driver more than ever”.

Last month the Communist Party leadership approved a new five-year plan which put scientific and technological innovation at the heart of China’s modernization program to become one of the world’s most advanced countries by 2035. The plan also cemented the role of the so-called “dual circulation” strategy, which places greater emphasis on domestic markets as a driver of growth while also seeking to move beyond cheap manufacturing for exports. Vice Premier Liu acknowledged that geopolitics and the Covid-19 pandemic have had a profound impact on global production and value chains. The key to transforming China’s growth model into a “new development pattern” is to clear any obstruction to economic activity and that, in turn, calls for an improved capacity for innovation, Liu argued. “That requires deepening reforms, expanding the open-door policy, fostering scientific and technological innovations, and upgrading the industrial structure,” he wrote. “Accelerating the push for self-reliance in science and technology is imperative in both promoting domestic market circulation and projecting China to a dominant position in the global economy.” Liu also said it was important that the financial services sector helped to support the real economy and foster innovation.

He also argued that the development model that had fueled China’s phenomenal growth since the 1980s also exposed the country’s vulnerability and dependency on imported resources and export markets. A shift to innovation-driven development would help to overcome these problems, as well as others caused by changes to domestic supply and demand, such as the disconnect between production and consumption and a foreign stranglehold over critical technology.

To achieve its goal of self-reliance, Liu said China would strengthen its R&D capacity, boost international collaboration, and give corporations a greater role in driving innovation. He also discussed other strategies, including a focus on core cities and urban clusters, improving income distribution, expanding the middle class and “quality” development under the Belt and Road Initiative. Li Xuesong, Deputy Director of the Institute of Industrial Economics under the Chinese Academy of Social Sciences, told a briefing in Beijing that China’s current innovation capacity was not yet able to meet the demand for high-quality economic growth, and that market forces could help accelerate the innovation drive, the South China Morning Post reports.