Knowledge economy set to power nation's next growth wave

Over the past decade, China has shifted from an economy driven mainly by low-cost manufacturing to one increasingly powered by research-based companies in areas such as semiconductors, artificial intelligence, biotech, new energy and advanced materials.

Nationwide research and development expenditure has grown around 10 percent annually in recent years, and high-value invention patents have climbed sharply, with China now ranking 10th in the Global Innovation Index.

Behind these aggregate numbers is the strong growth of knowledge-intensive enterprises — companies whose competitive edge comes less from cheap labor and more from scientific know-how, data and complex problem-solving capabilities.

The nation's newly adopted 15th Five-Year Plan (2026-30) treats these enterprises as central actors in what Beijing calls "new quality productive forces". Policy recommendations released in late 2025 and early 2026 place innovation and technological self-reliance at the core of national security and development, calling for breakthroughs in "choke point technologies" such as chips, industrial machinery and advanced materials.

The national plan envisions a dense landscape of regional innovation hubs, testing platforms and science parks where enterprises lead R&D consortia, collaborate with universities and research institutes, and rapidly commercialize new technologies.

The recently held two sessions — the annual meetings of China's top legislative and political advisory bodies — translated this strategic vision into concrete signals for the year.

The Government Work Report set a GDP growth target of 4.5 to 5 percent for 2026, underscoring a pivot from sheer speed to "high-quality growth" grounded in productivity and technological upgrading rather than in resource-intensive expansion. Ministers highlighted a "hard-core" report card: sustained double-digit growth in R&D outlays, rising density of top-tier science and technology clusters, and major progress in chip research. At the same time, the government committed to keeping annual R&D investment growth above 7 percent from a much larger base, implying a massive cumulative push into hard-tech sectors over the plan period.

For knowledge-intensive entrepreneurs, this policy environment is both demanding and full of opportunity.

The five-year plan calls for "extraordinary measures" to secure decisive breakthroughs in critical technologies while deepening the integration of scientific and industrial innovation. Enterprises are expected to assume the role of innovation engines, leading national R&D projects, forming cross-industry innovation alliances, and turning frontier science into commercially viable products, services and platforms. Incentives include expanded venture investment, stronger intellectual property protection in emerging fields, tax breaks for R&D, and improved infrastructure in development zones and industrial parks that host high-tech companies.

Equally important is the plan's focus on human capital. The Chinese government aims to build an "integrated framework" linking education, science and technology, and talent, with universities, research institutions and enterprises jointly training the next generation of scientists, engineers and entrepreneurial leaders. Policies encourage world-class foreign universities to run STEM (science, technology, engineering and math) programs and joint labs in China, overseas study in priority disciplines, and targeted mechanisms to attract and retain global talent. This is not just about producing more graduates; it is about cultivating teams capable of operating at the frontier of AI, quantum technology, biomanufacturing and other future industries explicitly prioritized in the 15th Five-Year Plan.

From a global perspective, the combination of ambitious national targets and an increasingly sophisticated private sector suggests that the next wave of Chinese growth will be shaped by knowledge-intensive entrepreneurship rather than by the factory-led boom of previous decades.

China's current policy direction outlines a development model in which small, agile technology companies, specialized service providers, and rapidly expanding "unicorn" companies — startup enterprises with a valuation of over $1 billion — are expected to generate an increasing share of value-added, exports and high-quality employment.

For international businesses and policymakers, this shift implies engaging with China not only as a manufacturing base or consumer market, but increasingly as a dynamic innovation ecosystem. In many sectors, China is emerging simultaneously as a critical innovation partner and a formidable competitor, with its future economic trajectory closely tied to the capacity of its knowledge-intensive entrepreneurs to scale, innovate and compete globally.

The author is former minister of tourism of Brazil, a distinguished professor at Tsinghua University and a professor at the Chinese University of Hong Kong (Shenzhen).

The views do not necessarily reflect those of China Daily.