Guidelines address gap between ‘old’ and ‘new’ sectors

Editor’s note: China has issued guidelines aimed at accelerating the development of new quality productive forces to bolster high-quality development. Zhong Huiyong, an associate researcher at the Antai College of Economics and Management at Shanghai Jiao Tong University, and Teng Tai, director of the WANB New Economy Institute, spoke to ThePaper.cn, a digital media outlet based in Shanghai, to explain these guidelines. Below are excerpts of the interviews. The views don’t necessarily represent those of China Daily.

Capital and policy support are concentrated in a few emerging sectors, leading to inflated asset prices in emerging industries and heightened pressure on traditional industries.

However, traditional and emerging industries are not rivaling each other. The efficiency of some emerging industries has not been fully tested, while some traditional industries have got a new lease on life through digital and intelligent transformation and green upgrading.

The guidelines emphasize increasing total factor productivity (TFP) as a defining measure of progress. Using TFP as the benchmark helps move beyond the simplistic labeling of industries as “old” and “new”, ensuring that resources flow to sectors with higher efficiency.

Narrowing the divide between traditional and emerging industries requires dismantling institutional barriers related to household registration, social security and land, and removing obstacles to the free flow of production factors. This is crucial for reducing the divergence in the performance of emerging and traditional industries. Additionally, the establishment of a unified national market will promote effective competition and help bridge this performance gap.

In the long run, the focus should be on accelerating the integration of new technologies into traditional sectors, supporting their transformation and upgrading, enhancing workforce skills and expanding effective demand. This strategy will help translate innovation into broader productivity growth across the economy.

Businesses should explore innovation pathways and technological approaches, with the market serving as the ultimate test. The government’s role should center on supporting basic research, protecting intellectual property rights and regulating market competition.

Effective governance should focus on creating a stable, fair and predictable environment for innovation, rather than selecting projects or allocating resources on behalf of the market. Local governments should avoid rushing to invest in fashionable industries and substituting fiscal subsidies for market competition, which can lead to redundant construction and wasted resources.

Creating a stable and predictable institutional environment is crucial for businesses to focus on innovation. This includes supporting long-term investments, rewarding successful innovations and allowing room for trial and error in research and development. The government should strengthen intellectual property protection, ensure fair competition and improve mechanisms for supporting patient capital and allowing reasonable tolerance for R&D failures.

R&D projects aligned with national strategic priorities should be elevated to the national project level. However, businesses must be allowed to choose their own technological pathways and government support should be evaluated based on tangible innovation outcomes.

The development of artificial intelligence must be approached with strategic foresight and a long-term perspective. While there are concerns about a potential excess in computing power capacity in the short term, such concerns need not be overstated.

AI computing infrastructure serves multiple sectors. Computing power can support virtually every industry, and tokens are a common resource across applications. Also, AI computing is not confined by geographical boundaries. Whether computing capacity is sufficient or excessive cannot be judged by looking at one particular region or industry. Computing power will be crucial for driving industrial transformation across sectors in the years ahead. Its development should therefore be assessed with this broader potential in mind.