China’s New Take on Government-led Domestic Industrialization
The 20th National Congress of the Communist Party of China held in Beijing from October 16th to 23rd, 2022 has attracted unprecedented attention from the domestic and international community. At Influence Matters, we have followed the conference and the relevant reports of the Chinese media on the conference to get a feel for upcoming policy direction and the impact on technology businesses in China.
Some of the key takeaways for foreign business operating in China are that China reaffirms its commitment to what used to be the China 2025 plan, the objective to develop a homegrown, globally leading innovation ecosystem in certain technologies including semiconductor and smart industry, but with a more thought through approach to government oversight and foundational investment in R&D and talent. Gone are the days of unlimited funding with little oversight on the spending.
The Party also reaffirmed its commitment to globalization and its role in it, planning to continue improving the operation environment for foreign-invested companies in China and attracting FDIs. Likely heavily included in the report’s message in response to recent criticism about China’s zero-covid and its impact on the country’s place in the global supply-chain system, and the investment freeze by many foreign businesses in China.
In the report of the 20th National Congress of the Communist Party of China, the term “Chinese-style Modernization” appeared for the first time, and comprehensively summarized the party’s theory in the continuous exploration of the socialist road from the perspective of population size, common prosperity, material and spiritual civilization, coexistence between man and nature, and the path of peaceful development achievement.
In addition, the report pointed out that China must insist that technology is the primary productive force, talent is the primary resource, and innovation is the primary driving force. The country needs to accelerate the realization of high-level scientific and technological self-reliance and self-improvement, and focus on the needs of the country, and gather strength to carry out original and leading scientific and technological research. On the road to “Chinese-style Modernization”, science and technology are undoubtedly the most important basic supports. This conference has established scientific and technological development as the important foundation and goal of “Chinese-style Modernization” from the strategic height of national construction.
Focusing on “Chinese-style Modernization”, we saw that the report went into detail in areas related to business and technology: technological development, opening to the outside world, economic construction, and green development.
Technological Development: A New National System
Gathering strength to carry out original and leading scientific and technological research is an essential element stressed in this report. Zhu Yongxin, deputy secretary-general of the National Committee of the Chinese People’s Political Consultative Conference, said in an interview with The Paper, that facing increasing restrictions on advanced technology developed by estern countries, “.
Wang Haiyan, deputy dean of the School of Public Policy and Management of the University of Chinese Academy of Sciences, told the BJNEWS that the report encourages to “resolutely win the battle of key core technologies, focusing the country’s effort on breaking through break through the bottlenecks technologies.”
Influence Matters’ insights: According to the report of the 20th National Congress of the Communist Party of China, and focus on tackling key problems according to the country’s current needs, especially in the fields of chip manufacturing, operating systems, industrial design software, high-end capacitors and resistors, and aero-engines, and in the next few years, the process of localization substitution in various fields will be rapidly improved. From a market perspective, universities, research institutes, state-owned enterprises, and the scientific and technological talent market are all new areas of cooperation that can be further expanded. In addition, based on the current low localization substitution rate in China in the above key areas, the future market opportunity is also considerable.
Opening to the outside world: Strengthen internal circulation, improve external circulation, and open to the outside world at a high level
The report of this conference emphasized the “dual circulation” strategy and high-level opening to the outside world. Zhu Guangyao, the former deputy minister of the Ministry of Finance, said in an that the domestic market should be tightly integrated with the international market, and the overall layout should be carried out. The domestic cycle definitely does not exclude international economic cooperation. China must unswervingly make its contribution to promoting economic globalization.
In the future, China will intensify its policies to attract foreign investment, to highlight the positive role of foreign investment in promoting high-quality development and smoothing domestic and international circulation. The first is to further increase the encouragement of foreign investment; the second is to further promote the implementation of major foreign-funded projects; the third is to further optimize the services to foreign-funded enterprises.
Influence Matters’ insights: Due to the pandemic-related travel and supply chain challenges, China’s objective is to expand the domestic demand potential of the domestic super, using the most complete industrial system in China and stimulating the competitive advantage of domestic products and services, in a bid to achieve global standard status for some key technologies, helping to position China on a stronger foot in the global competitive environment.
Economic construction: focus on the real economy and build a high-level economy
This report pointed out that the focus of economic development should be implemented on the real economy and new industrialization should be promoted. Yang Zhiyong, vice president of the Institute of Financial and Economic Strategy of the Chinese Academy of Social Sciences, told 21jingji that new industrialization is industrialization supported by technology, to promote the digitalization of industries and other measures related to this. Yang Zhiyong also said, “The modern service industry is also very important, such as promoting financialto better serve the real economy and promoting the integration of data and reality.”
Influence Matters’ insights: From a market perspective, around the essential characteristics of new industrialization, many new industrial digitization and informatization markets will emerge. For instance, there is still a lot of room for development in the digitalization process in the domestic manufacturing industry. In the future, there will be broad market prospects in the fields of industrial software, digital management, automated production, and industrial cloud.
Green Development: Harmonious Coexistence between Man and Nature
The comments in the report demonstrate China’s firm determination to fulfill its carbon neutrality commitments. In the future, pollution prevention and control will be further promoted, and based on the advantages of energy and resource endowments, the carbon dioxide emissions reduction actions will be implemented step by step in a planned way, and the planning and construction of a new energy system will be accelerated.
Influence Matters’ insights: On the one hand, green development is an important manifestation of corporate social responsibility. In the context of global carbon reduction, for manufacturing and technology companies, actively fulfilling green development responsibilities can not only enhance corporate image and competitive advantage, but also promote the advancement of the company’s own technology and the possibility of opening up new innovation fields.
If you would like to discuss how your business opportunities are affected in China, get in touch through our contact page!
