The Basic Realization of Economic Modernization by 2035

Abstract

The basic realization of economic modernization is the economic foundation and basic condition for basic realization of socialist modernization by 2035. It has a specific meaning and several key indicators. According to the report of the 19th and 20th National Congress of the Communist Party of China, by 2035, China’s economic strength, scientific and technological strength, and comprehensive national strength will jump significantly to the level of medium-developed countries, ranking among the forefront of the world’s innovative countries.

The basic realization of economic modernization is the economic foundation and basic condition for basic realization of socialist modernization by 2035. It has a specific meaning and several key indicators. According to the report of the 19th and 20th National Congress of the Communist Party of China, by 2035, China’s economic strength, scientific and technological strength, and comprehensive national strength will jump significantly to the level of medium-developed countries, ranking among the forefront of the world’s innovative countries.¹ Economic strength is the core for achieving the goals listed above.

According to the “CPC Central Committee’s Proposals for Formulating the 14th Five-Year Plan (2021–2025) for National Economic and Social Development and the Long-Range Objectives Through the Year 2035” of the Fifth Plenary Session of the 19th Central Committee of the Communist Party of China, by 2035, China’s total economic volume and the per capita income of urban and rural residents will reach a new level, and key core technologies will achieve major breakthroughs and enter the forefront of the world’s innovative countries. New industrialization, informatization, urbanization, agricultural modernization will be basically realized, and a modern economic system will be built. In this regard, General Secretary Xi Jinping statement in the “Notes to the Proposals” that by the end of the “14th Five-Year Plan” period, the current high-income national standards will be reached, and the total economic volume or per capita income will be doubled by 2035 (that is, the average annual growth rate will be 4.7%), which are entirely possible.² This quantitative target is instructive, feasible and assessable for all regions of the country. To this end, we have made medium and long-term forecasts and developed an analysis of trends and key indicators of basically realizing economic modernization by 2035.

3.1 China’s Economy Maintains Medium-to-High-Speed Growth

China’s economy has huge development potential and growth inertias, and it will remain in a stage of medium-to-high-speed growth (about 5%) in the coming years. The growth rate during the period of 2021–2025 will be 5.5%, which is in the stage of medium-to-high-speed growth; it will be 5.0% in the period of 2025–2030 and 4.5% in the period of 2030–2035, both of which fall under the stage of medium-speed growth. According to this growth rate trend, China will double its GDP (at constant price in 2020) in 15 years, from CNY 101.4 trillion in 2020 to over CNY 213 trillion in 2035, which is equivalent to 2.1 times 2020’s level (see Table 3.1).³ This expected growth rate is in line with the characteristics of the acceleration, structural optimization, and kinetic energy transformation as China enters the high-income development stage, and is more conducive to the realization of high-quality economic development, and thus to the realization of innovative development, coordinated development, green development, open development, shared development and safe development. It should be pointed out that this growth rate is significantly higher than the average growth rate of high-income countries other than China, which is about 2%, and is also higher than the average growth rate of developed countries (referring to OECD countries) and the United States.⁴ Due to the fact that China’s per capita GDP is much lower than that of the United States, China is still demonstrating a marked “catch-up” effect. Judging from the history of China’s economic development, usually the actual results will exceed the expected target, which can instead be treated as the lower end of expected outcomes of China’s economic growth.

Table 3.1 Growth of China’s GDP and other indicators (2020–2035)

China’s economic strength will jump significantly, fundamentally changing the world’s overall economic pattern. In terms of purchasing power parity (the international dollar in 2017), China’s GDP has surpassed the European Union in 2016, and surpassed the United States in 2017, ranking first in the world.⁵ This is the most important starting point for China’s high-quality economic development heading towards 2035. China’s GDP will increase from 23.02 trillion international dollars in 2020 to more than 48.5 trillion international dollars in 2035 (see Table 3.1). China’s GDP will account for about 27% of the world’s total in 2035, from 18.3% in 2020. The contribution rate to world GDP growth has remained above 1/3,⁶ and it is still acting as a major driving factor for the world economy. At present, the world economic pattern has formed a new situation involving the three major economies of “China-US-EU”, but the development is extremely unbalanced. During the period from 2000 to 2019, calculated in international dollar in 2017, China’s GDP growth rate was 9.0%, the United State’s rate was 2.0%, and that of the European Union was 1.8%. By 2020, the three major economies accounted for 18.3%, 15.8% and 14.9% of the world’s GDP (international dollar in 2017), respectively. In the coming years, it will have a significant and far-reaching impact, further strengthen the imbalance between the three major economies of China, the United States and the European Union, and it will be more conducive to China’s economic strength to surpassing that of the United States and the European Union.⁷

China has a comprehensive source of resources to achieve medium–high or medium-speed growth. In terms of growth sources, China has many advantages for development.

First, China’s capital availability ranks first in the world and has the fastest growth rate internationally. To start with, China has one of the highest domestic savings rates in the world (44.5% in 2020). Secondly, it has one of the highest domestic investment rates in the world (43.5% in 2020). Thirdly, China’s gross capital formation (USD in 2010) ranks first in the world, surpassing the United States in 2009, and reaching USD 6.37 trillion in 2020—which is equivalent to 1.53 times the value of the United States (USD 4.16 trillion).⁸ During the period from 2010 to 2020, the growth rate of China’s total capital formation (USD in 2010) was as high as 6.6%, which was twice the average annual growth rate of the United States (3.3%).⁹

Second, China’s labor force resources also rank first in the world. In 2020, China’s labor force accounted for 22.9% of the world’s total, equivalent to 1.16 times that of the OECD’s share of the world’s share (19.7%).¹⁰ Although China’s labor force shrank and demographic dividends decreased, the employment rate of the total population remained above 55%,¹¹ among which the employment participation rate of women also stayed at a relatively high level (62%). This was obviously higher than the OECD average (52%) and the world average (46%)—ranking among the top in the world.¹² The amount of non-agricultural employment continued to grow¹³ and due to agricultural population transferring to non-agricultural sectors, the amount of agricultural employment continued to decline¹⁴—while the productivity of agriculture had a steady increase. Our country has the world’s largest advantage in terms of talent. From the perspective of human capital elements, China has become the world’s largest reservoir of knowledge-based, skilled, entrepreneurial and innovative workers, and its proportion of the working population possessing labor skills has increased significantly. According to the information provided by the Ministry of Human Resources and Social Security, in 2020, there was more than 200 million skilled workers in China, accounting for 26.7% of the total employment in the country. Among them, there are more than 50 million highly skilled workers, accounting for 1/4 of the total amount of skilled workers.¹⁵ It is estimated that by 2035, the number will reach 300 million and 100 million respectively, and highly skilled talent will account for 1/3 of total amount of skilled workers. In addition, China has the advantage of new high-quality labor force. Every year, there are tens of millions of graduates from colleges, universities, and graduate schools (more than 9 million in 2021) and 1 million graduates from technical colleges. The two together exceed 10 million people, accounting for more than 70% of the new urban employment. The scale of various types of talents is rapidly expanding, one of economic growth sources is shifting from the declining demographic dividends to the rising of talent dividends and human capital. For example, the annual growth rate of the schooling years of working-age population is around 2%, effectively supporting continuous economic growth.

Third, China has an advantage of innovation-driven development. The growth rate of total factor productivity (TFP) has remained above 1%, and the contribution rate of scientific and technological progress has increased from 60% in 2020 to more than 65%.

Fourth, China still has two types of “economic catch-up” advantages. The first is worldwide economic catch-up advantage. Calculated in terms of purchasing power parity (international dollar in 2017), China’s per capita GDP was equivalent to 27.1% of that of the US in 2020, and will be above 40% in 2035 so there is still room for further closing the gap between China and the levels of other countries.¹⁶ The second is the economic “catching up” of various domestic regions. The gap between the per capita GDP of the central and western regions and the eastern coastal regions is very large. According to the 2021 purchasing power parity and CNY conversion factor of 4.19 provided by the World Bank database,¹⁷ the per capita GDP of Beijing in 2021 was 43,909 international dollars, 30th in the world. Shanghai was 41,439 international dollars, 33rd in the world and Jiangsu was 32,706 international dollars. Fujian was 27,909 international dollars, Tianjin was 27,143 international dollars, and Zhejiang was 26,977 international dollars. All of these areas have entered the global stage of high-income level, thereby driving the growth of per capita GDP in other domestic regions and helping them converge. It is not only necessary but also possible that China maintains medium-to-high-speed growth for more than ten years in the future. Through comprehensively deepening reforms, comprehensively opening to the outside world, and comprehensively building a unified, wide-scale domestic market, the huge potential of China’s economic development can be fully put into play.

Fifth, China will accelerate the development of the tertiary industry. According to the USD in 2015, the added value of China’s service industry in 2020 accounted for 14.6% of the world’s share, which was significantly lower than that of the United States (28.7%),¹⁸ indicating that China’s service industry added value and service trade still have huge room for development. In 2020, the added value of China’s tertiary industry accounted for 54.5% of the national GDP, which was significantly lower than the world average (65.7% in 2020).¹⁹ In 2020, China’s tertiary industry accounted for 47.7% of the national employment, which was also lower than the average of world (51% in 2019).²⁰ This shows that China’s tertiary industry has had great development potential in for creating employment. It can not only absorb a large number of new laborers, such as college and technical secondary school graduates, but also absorb a large number of transferred labor forces from the primary and secondary industry. The number of employed people in the primary industry has continued to decline significantly, with a decrease of 94 million people from 2010 to 2021. The number of employed people in the secondary industry has continued to decline since 2012, with a decrease of 8.27 million people, while the number of people employed in the tertiary industry has increased by 86.82 million people.²¹ To this end, the outline of the “14th Five-Year Plan” clearly states: we must vigorously promote the integrated development of the productive service industry, promote the deep integration of modern service industry with advanced manufacturing and modern agriculture, and accelerate the quality development of life service industry, especially the development of health, pension, childcare, culture, tourism, sports, property management and other service industries. We must expand the opening of the service industry to the interior and the outside world, especially the development of export-oriented service trade. To this end, post-secondary education must adapt to and be redirected into the cultivation of professional talent for China’s modern service industry.

Sixth, China will maintain the fastest growth rate of all-personnel labor productivity in the world. In the coming years, the biggest advantage of China’s economy maintaining medium-to-high-speed growth will come from possessing the world’s largest labor force which experiences continuous improvement of human capital. This will keep China’s labor productivity growth at the forefront of the world. From 2010 to 2020, China’s labor productivity (using 2017 international dollars) had an average annual growth rate of 6.9%, significantly higher than the world average labor productivity (2.0%) in the same period, and much higher than the 1.0% growth rate of the United States in the same period.²² This is the main reason why the Chinese economy is able to successfully catch up with the US economy. It is estimated that from 2021 to 2035, the average annual growth rate of labor productivity in China will remain above 5%, slightly higher than the growth rate of GDP. By 2035, labor productivity (constant price) will be more than doubled. China’s labor productivity (international dollar in 2017) will rise from 31,000 international dollars in 2020 to 66,000 international dollars in 2035, and the proportion of China’s labor productivity in the US level will increase from 23.9% in 2020 to about 40% in 2035 (see Table 3.1). This is because: Firstly, the stock of physical capital per capita of China’s labor force continues to grow. With China’s higher education entering the stage of popularization (gross enrollment rate greater than 50%) from the stage of massification (gross enrollment rate less than 50%), the gross enrollment rate of higher education will rise from the 57.8% in 2021 to more than 75% in 2035, and will continue to maintain more than 80% (the average of OECD countries in 2020 was 77%²³) to ensure the continuous growth of per capita human capital (average years of education). It is estimated that China’s population of higher education graduates will increase from 218 million in 2020 to more than 400 million in 2035, accounting for more than half of the labor force. This group will become the main group composing the middle-income sector. This is not only conducive to promoting economic growth, but also conducive to promoting common prosperity. More than half of the new labor force has received higher education, and the estimated average schooling year has reached 13.9 years.²⁴ It is expected to reach more than 16 years by 2035—striving to reach the rather-high development level (16.4 years).²⁵ This increase will continue to improve the human capital level of the new labor force.²⁶ The effect of human capital dividend on economic growth and social progress is becoming more and more obvious. Secondly, China’s labor force continues to shift from low-productivity sectors to high-productivity sectors. With the accelerated accumulation of physical and human capital in China, and the structural effect of the continuous transfer of labor from the agricultural sector to non-agricultural industries, labor resources will continue to shift from low-productivity sectors to high-productivity sectors. This will drive the shift from low-paying jobs to higher-paying jobs. These changes and the continuous improvements incurred by the transition from unprofessional and unskilled labor to profession and skilled labor are the main sources of sustained growth in China’s labor productivity. Thirdly, China has built the world’s largest scientific and technological innovation team with a large range of different expertise areas. The total number of human resources in China has reached 220 million people, accounting for 29.25% of the total number of employees in the country, including 78.4 million professional and technical personnel.²⁷ China has the world’s largest professional full-time talent pool, which in turn increases labor productivity at a slightly faster rate than the rate of economic growth.

Based on the overall trend of China’s economic growth, China put forward the goal of doubling the GDP by 2035 compared to the 2020 on the basis of improving the balance, coordination and sustainability of development. This goes along with goals associated with quantitative indicators such as the goal of simultaneous growth of the all-personnel labor productivity and the per capita disposable income of residents. These goals and metrics will become the foundation for basically realizing socialist economic modernization by 2035.

3.2 China’s Per Capita GDP Reaches the Level of Medium-Developed Countries

The realization of the economic modernization by 2035 can be divided into two steps: The first step will be to enter from the upper-middle income level to the high-income level by 2025; the second step will be to reach the level of medium-developed countries on the basis of the high-income level by 2035.

First, during the “14th Five-Year Plan” period, China’s per capita GDP will reach the high-income level. Calculated in purchasing power parity (international dollar in 2017), China’s per capita GDP will increase from 16,300 international dollars in 2020 to more than 22,000 international dollars in 2025. This is equivalent to an increase in the level of US per capita GDP from 1/4 of its 2020 level (27.1%) to 1/3 of its level in 2025 (32.4%). China’s per capita national income will enter a high-income stage. This will have a significant impact on the global high-income overall dynamic. The total population of high-income countries and regions in the world will rise from 1.215 billion in 2020 to more than 2.6 billion, which is equivalent to an increase of 1.4 billion people. China has become the country with the largest population of high-income earners in the world. A country with a high-income population is one of the notable signs of a post-well-off society. Thus, China will still function as the largest engine supporting the world’s economic growth.

By 2035, China’s per capita GDP will reach the level of medium-developed countries. China will successfully cross the middle-income stage and continue to make a big step forward in the high-income stage.²⁸ China’s per capita GDP will rise from CNY 72,000 in 2020 to CNY 151,000 in 2035, achieving the goal of doubling, equivalent to reaching 34,200 international dollars from the 16,300 international dollars of 2020 (see Table 3.1). The results may again exceed this expectation.

Furthermore, rural and urban residents’ per capita income will reach a new level. According to the goals set out in the report to the 20th National Congress of the Communist Party of China: “The growth of the residents’ income will be basically synchronized with economic growth, and the increase in labor remuneration will be basically synchronized with the increase in labor productivity.” From 2021 to 2035, the growth rate of residents’ income will remain at around 5%, and the residents’ income (at constant prices) will basically double. As a result, the per capita consumption level of residents will increase along with it, and the consumption structure will be further optimized. China vigorously advocates achieving wealth through labor, innovation, entrepreneurship, which promotes the continuous increase in the proportion of workers’ wage income in per capita disposable income, the increasingly diversified sources of residents’ income, and the continuous increase in net operating income, net property income, and percentage of net transfer of income. This will provide a better and higher income level foundation for the country to solidly promote common prosperity in the future.

3.3 Building a Strong Domestic Demand Market

From the perspective of future development trends, consumption growth has become the main driving force of economic growth. In the historical process of China’s transition to a high-income and medium-developed economy, economic growth driven by consumption, especially resident consumption, will be a prominent feature of this stage of development. China already has a large-scale domestic economy with 500 million households²⁹ and 1.4 billion consumers. The consumption market has become a long-term significant advantage of China’s economic development. For this reason, China continues to implement the strategy of expanding domestic demand and strengthens the basic and key role of consumption and investment in economic development. In this process, the rising proportion of final consumption expenditure in GDP is a basic evident trend. It is expected to rise from 54.3% in 2020 to 60.7% in 2025, and further rise to 66.5% in 2035. Of the increased amounts, the government and household consumption rates will reach 17.6% and 48.9% respectively in 2035 (see Table 3.2).

Table 3.2 Composition of GDP by expenditure approach (2020–2035) Unit: %

China is building the world’s largest domestic consumer market. China has become the second largest domestic consumption country in the world. In 2020, China’s total final consumption expenditure (international dollar in 2017) accounted for 13.0% of the world’s total, and was only equivalent to 64.9% of the United States.³⁰ This is still significantly lower than the proportion of China’s total population in the world (18.2%³¹), which shows that China’s per capita final Consumer spending is still significantly lower than the world average, and it is even more necessary to build the world’s largest domestic consumer market and improve the consumption welfare of all people. By 2035, China’s total final consumption expenditure will at least double, and its proportion in the world will further increase, reaching a level proportionate with the proportion of China’s population in the world. The core goal of implementing the strategy of expanding domestic demand is to expand domestic consumption demand, especially expanding the potential, diverse and personalized needs of 1.4 billion consumers and 500 million households. To this end, it is necessary to comprehensively promote the consumption of residents, society and government, strengthen the basic role in economic development, and accelerate the construction of a strong domestic consumption market. At the same time, China actively advocates green consumption, promotes a green and low-carbon lifestyle, and helps implement sustainable consumption.

China has the world’s largest consumer group. In 2020, there was 500 million households and 1.4 billion consumers nationwide.³² These are China’s unique advantages in terms of population and family size, consumption, and market. In 2020, the total domestic consumption expenditure (PPP, international dollar in 2017) accounted for 13.0% of the world total,³³ but the proportion of household consumption in GDP was only 38.7%, which is much lower than the average of world (57.7%³⁴). This signifies that there is a large amount of room for growth. It is estimated that by 2025, the proportion of household consumption expenditure in the total GDP will increase to 44.6%, and the total household consumption expenditure will increase from CNY 38.8 trillion in 2020 to nearly CNY 60 trillion, which is equivalent to an increase from 8.693 trillion international dollars (in 2017³⁵) to 13.4 trillion international dollars. By 2035, this proportion will increase to 48.9%. Total household consumption expenditure rose to over CNY 77.6 trillion, equivalent to 17.4 trillion international dollars Therefore, the core goal of expanding domestic demand is to expand the consumption demand of urban and rural residents. China has the most conditions and the highest ability to achieve the goal of “continuously meeting the people’s growing needs for a better life”.³⁶

China will become the world’s largest government consumer spending country. Calculated in current USD, China’s government consumption expenditure has risen from USD 887.94 billion in 2010 to USD 2.461 trillion in 2020, making it the world’s second largest government consumption expenditure country, with an average annual growth rate of 10.71%. This is much higher than the world average (2.5%). The proportion of China’s government consumption expenditure in the world total increased from 7.7% to 16.4%, but it was still lower than that of the United States (20.5%)³⁷—if calculated by purchasing power parity, it will in fact surpass the United States. For the near future, the proportion of China’s government consumption expenditure in GDP will continue to increase, from 16.4% in 2020 to 17.8% in 2025, and to more than 20% in 2035. As the largest public service provider, China will directly serve more than 1.4 billion people, provide more accessible, fairer and higher-quality basic public services, and support and drive the development of non-basic public services. Government consumption is an important part of the domestic service consumption market. It has a complementary and interactive relationship with residential consumption, and it is also an important part of vigorously developing tertiary industries.

China is still the world’s largest domestic investment market. This is China’s most important and long-term advantage in expanding domestic demand. China is one of the countries with high domestic savings rate in the world, reaching 44.5% in 2020, much higher than the average of world (26.1%).³⁸ China is also one of the countries with the highest proportion of total capital formation to GDP in the world, reaching 43.5% in 2020, 17.1 percentage points higher than the average of world (26.4% in 2020³⁹), falling to 39.3% in 2025, and further dropping in 2035 to 32.5% (see Table 3.2). According to the USD exchange rate in 2010, China’s total capital formation accounted for 29.2% of the world’s total in 2020, equivalent to 1.53 times that of the United States (19.1%)⁴⁰ and significantly higher than the proportion of China’s total population in the world (18.2% in 2020).⁴¹ This shows that China is the country with the most capital resources in the world, and has the ability to invest in productive industrial systems and modern infrastructure systems as well as urban and rural facilities. This is a basis for China’s long-term medium-to-high speed growth. From 2020 to 2035, the contribution rate of physical capital to GDP growth rate is still more than 40%. This is the most important factor of production for China’s long-term sustainable development. It will help China accelerate its accumulation of capital for urban and rural construction, help improve the building of the world’s most advanced modern infrastructure system covering the interconnection of all parts of the country, reshape China’s economic geography, and build the world’s largest domestic demand (especially consumption) market.

Implement the strategy of actively expanding domestic demand is still a long-term strategy in China, which is complementary to the main line of supply-side structural reform and the “dual circulation” strategy. Especially in the context of the possibly regular, medium-term and long-term global pandemic situation, it has more practical and long-term significance. This is determined by China’s basic national conditions and major production factors. The needs of millions of households are varied and high, and the domestic consumer market has developed a huge capacity. China is still in a golden development period when the “five modernizations” of industrialization, informatization, urbanization, agricultural modernization, and infrastructure modernization promote each other and develop in parallel. Whether it is national infrastructure construction and new infrastructure construction, urbanization and new rural construction and residential housing construction (especially the renovation of over 20 million old houses)⁴²; whether it is the private consumption of 1.4 billion consumers, 500 million households, or government public consumption that provides basic public services to all urban and rural people; whether it is the upgrading of traditional consumption models such as clothing, food, housing, and transportation, or the innovation of consumption models such as e-commerce and artificial intelligence—all of them determined that we must do everything possible to build China into the world’s strongest domestic consumer market and the world’s strongest domestic investment market. It is China’s huge development potential and long-term advantage and an urgent need to accelerate the establishment of a “dual circulation” development pattern in which domestic economic cycle plays a leading role while international economic cycle remains its extension and supplement.

3.4 Building the World’s Largest Modern Infrastructure

China will build the world’s largest advanced communication network infrastructure powerhouse. The modernization of infrastructure is a major symbolic measure of a country’s overall modernization. At present, the overall level of China’s infrastructure modernization has reached the level of the OECD’s developed countries, and infrastructure has become a key field and fountainhead for the basic realization of national modernization. The total number of mobile phones in China exceeds that of OECD countries, reaching 1.72 billion by 2020, surpassing that of OECD countries (1.60 billion).⁴³ The penetration rate of broadband Internet in China has risen from 12.66% in 2012 to 33.60% in 2020, surpassing 33.31% in OECD countries,⁴⁴ accounting for 39.4% of the total broadband Internet in the world.⁴⁵ In 2020, the penetration rate of fixed broadband households in China had reached 96%, and the penetration rate of mobile broadband users had reached 108%, both exceeding the expected targets of 70% and 85% of the national “13th Five-Year Plan” and exceeding the 2025 target of 82% annual fixed broadband household penetration ahead of schedule. The number of netizens in China has increased from 564 million in 2012 to 1.032 billion in 2021, and the Internet penetration rate has increased from 42.1% to 73%. All prefecture-level cities have been fully incorporated into the optical network cities. The broadband connection rate of administrative villages and poverty alleviation villages has reached 100%. The large-scale deployment of IPv6 has achieved remarkable results, and the number of addresses owned ranks second in the world. The fixed network has gradually achieved a leap from 10 to 100 megabits and then to gigabit, and the mobile network has achieved a leap from “3G breakthrough” to “4G synchronization” to “5G leadership”. Among them, 4G network users are close to 1.3 billion, and the world’s largest optical fiber and mobile 5G broadband network have been built. The number of 5G base stations has reached 1.854 million, and 5G mobile phone users have exceeded 455 million.⁴⁶ In April 2021, China’s fiber broadband penetration rate was 94%, much higher than the 36.61% in the United States (2020) and 33.31% in OECD countries (2020). This was also significantly higher than the world average of 15.89% (2020).⁴⁷ The e-commerce transaction volume and mobile payment transaction scale ranked first in the world.⁴⁸ The national e-commerce transaction volume rose from CNY 20.8 trillion in 2015 to CNY 42.3 trillion in 2021, equivalent to 2.03 times that of 2015. This marks that China is at the forefront of the contemporary world information and network revolution, just as General Secretary Xi Jinping said: Since the 18th National Congress of the Communist Party of China, the Party Central Committee has attached great importance to the development of the digital economy, implementing the national strategies for cyber development and big data, expanding the space of the Internet economy, supporting various Internet-based innovations, and promoting the deep integration of the Internet, big data, artificial intelligence and the associated real economy. China has integrated and built a digital China and a smart society, promoting digital industrialization and industrial digitization, and building a digital industry cluster with international competitiveness. China’s digital economy has developed rapidly and achieved remarkable achievements.⁴⁹

Realize the infrastructure modernization basically. China will build the world’s largest modern transportation infrastructure, and realize the historic leap from a major transportation country to a powerful transportation country. The operating mileage of railways across China increased from 97,200 km in 2012 to 150,700 km in 2021. Among them, the operating mileage of high-speed railways increased from 9356 km in 2012 to 40,000 km in 2021. The railway covers 81% of the counties in the country. High-speed railway reaches 93% of cities with a population of more than 500,000.⁵⁰ The national highway mileage has increased from 4.24 million km in 2012 to 5.28 million kilometers, of which the operating mileage of expressways has increased from 96,200 km in 2012 to 169,100 km in 2021,⁵¹ connecting 95% of the country’s population and covering about 99% of urban and prefecture-level administrative centers with a population of 200,000. Among them, the total mileage of rural roads in China is 4.382 million km, accounting for 84.3% of the total road mileage.⁵² China has also become the world’s largest automobile kingdom. The number of civilian vehicles in the country has risen from 109 million in 2012 to 294 million in 2021, surpassing the figure of 271 million cars in the United States in 2020.⁵³ Of the total there was 260 million passenger cars.⁵⁴ At the same time, China has also become the world’s largest electric vehicle kingdom. Of the 6.75 million new energy vehicles sold globally in 2021, China’s electric vehicle sales reached about 3.3 million, accounting for 49% of the world’s total, and the United States was 608,000, accounting for only 9.0% of the world’s total.⁵⁵ According to statistics from the China Association of Automobile Manufacturers, as of the end of June 2022, the number of new energy vehicles in the country reached 10.01 million, of which the number of pure electric vehicles was 8.104 million, accounting for 81% of the total number of new energy vehicles.⁵⁶ The overall scale of China’s water transportation infrastructure remains the world’s largest. By the end of 2021, the country’s ports had 20,900 berths for production, 2,659 berths of 10,000 tons and above, and 128,000 km of inland waterways, including more than 16,000 km of high-grade waterways. The coastal transportation channel, the Yangtze River trunk line, the West River shipping trunk line, the Beijing-Hangzhou Grand Canal-Huai River, etc. have been utilized as the main water transportation channels.⁵⁷ China has become the country with the largest container terminal throughput in the world, and its proportion in the world has increased from 25.7% in 2012 to 32.3% in 2020, which is equivalent to 4.5 times the level of the United States.⁵⁸ China also is the country with the highest degree of maritime connectivity in the world. It has established maritime route connections with major regions and ports in more than 100 countries, and has become the country with the largest Liner Shipping Connectivity Index⁵⁹ in the world, rising from 133.8 in 2012 to 162.4 in 2020, which is close to a value of 1.56 times that of the United States (103.9). The global top ten ports in terms of container throughput in 2020 are as follows: Shanghai Port, Singapore Port, Ningbo Zhoushan Port, Shenzhen Port, Guangzhou Port, Qingdao Port, Busan Port, Tianjin Port, Hong Kong Port, Rotterdam Port, China has 7 of them (including Hong Kong).⁶⁰ This marks that China, which has a coastline of 18,000 km, has become a powerful country globally in terms of ocean transportation. China has built a world-class modern comprehensive transportation system and become a renowned country with strong transportation network. For this reason, the Ministry of Transport of the People’s Republic of China issued the “Green Transportation Standard System (2022)” to accelerate the development of the world’s largest green and low-carbon transportation system. This supports the promotion and the construction of an ecological civilization in the transportation industry, serving the national goal of peaking carbon and carbon neutrality, and helps in the fight of pollution prevention and control.⁶¹ The mileage of China’s oil (gas) pipelines has increased from 98,500 km in 2012 to 131,200 km in 2021,⁶² including 116,000 km of trunk natural gas pipelines.⁶³ Natural gas production increased from 110.6 billion cubic meters in 2012 to 207.6 billion cubic meters in 2021.⁶⁴ The modernization of transportation infrastructure has greatly promoted the flow of various elements of the domestic unified market, and favored the development of transportation modernization with Chinese characteristics. As General Secretary Xi Jinping said: “We adhere to the priority of transportation, and have built the world’s largest high-speed railway network, expressway network, and world-class port group. Aviation and navigation have reached the world, and the comprehensive transportation network has exceeded 6 million kilometers. We adhere to innovation and leadership. Major breakthroughs have been made in the manufacture of high-speed railway, large aircraft and other equipment. New energy vehicles account for more than half of the global total. Super-large transportation projects such as the Hong Kong-Zhuhai-Macao Bridge and Beijing Daxing International Airport have been completed and put into operation.”⁶⁵ “Transportation has become the pioneer of modernization with Chinese characteristics.” “Accelerate the construction of a strong transportation country; accelerate the formation of a comprehensive transport system that is safe, convenient, efficient, green and economical.”⁶⁶ The modernization of China’s transportation has reshaped China’s economic geography, accelerated domestic economic integration, and at the same time reshaped world economic geography, accelerated global economic integration, and created a modern comprehensive transportation system for the dual circulation for domestic and foreign markets.

Build the world’s largest modern national grid. China did not have its first 750 kV UHV transmission network until 2005, which is 40 years behind that time of implementation of the developed countries in the West. Since 2010, the size of the State Grid has nearly doubled. In 2020, the total electricity consumption in the company’s operating area reached 5.83 trillion kWh, the highest electricity load was 875 million kW, and the total installed capacity of grid-connected power generation was 1.7 billion kW, which exceeded the 4.28 trillion kWh value of the United States in 2020—equivalent to 1.36 times that of the United States.⁶⁷ By the end of 2020, the length of 110 (66) kV and above transmission lines was 1.142 million kilometers, and the substation (conversion) capacity was 5.23 billion kVA (kW). Among them, the State Grid has completed and put into operation 26 UHV projects of “14 AC and 12 DC”, and 31 UHV transmission projects in operation and under construction have a line length of 41,000 km. The UHV cumulative electricity transmission is more than 2.1 trillion kWh, ranking first in the world. By the end of 2020, the cumulative installed capacity of clean energy power generation was 740 million kilowatts, accounting for 75% of the national total, accounting for 43% of the total installed power capacity, of which clean energy power generation was 1.8 trillion kilowatt hours, accounting for 31.2% of the total power generation.⁶⁸ In addition, State Grid Corporation of China has built 10 transnational power transmission lines connecting Russia, Mongolia, Kyrgyzstan and other neighboring countries, and the accumulated electricity transaction has exceeded 31 billion kWh. State Grid ranks second in the world by Fortune Global 500 in 2021.

In fact, how can we measure the level of modernization development of a country? It is usually expressed in terms of GDP in the national economic accounts, but it is seriously affected by the exchange rate between the USD and the local currency. Even if the international dollar of purchasing power parity is used, it is unable to make an accurate international comparison. Therefore, I propose that the power generation can better reflect the modernization factors and level of modernization of a country. It is not affected by the currency of each country and the exchange with the USD in international comparison, and thus is more comparable and objective. China’s power generation has risen from 4.99 trillion kWh in 2012 to 8.53 trillion kWh in 2021, an increase of 70.9%, with an average annual growth rate of 6.1%. According to the “bp Statistical Review of World Energy 2022” provided by British Petroleum (BP), in fact, China’s power generation surpassed the EU in 2007, and surpassed the United States in 2011, and its share of the world’s power generation increased from 21.9% in 2012 to 30.0% in 2021, equivalent to nearly 2 times the United States’ share of the world’s power generation (15.5%).⁶⁹ In other words, China’s modernization factors is nearly twice that of the United States. This shows that the modernization factor of the physical quantity reflects the centrality of the historical process of modernization with Chinese characteristics in the world better than the modernization factor of monetary quantity.

3.5 Building a Strong Modern Economic System

The Fifth Plenary Session of the 19th Central Committee of the Communist Party of China clearly stated that by 2035, a new type of industrialization, informatization, urbanization, and agricultural modernization will be basically realized, and a modern economic system will be built.⁷⁰

A modern industrial system with optimized structure and coordinated development. As China moves from the upper-middle-income level to the high-income level, and then enters the medium-developed level, it is undergoing the process of continuous upgrading and optimization of its industrial structure. Specifically, the proportion of primary industry and the secondary industry has continued to decline, and the proportion of the tertiary industry has risen significantly, becoming the largest industry and employment channel. This is including the absorption of labor from the primary and secondary industries. The optimization and upgrading of the industrial structure will also promote the optimization of the employment structure. This increase is in line with the basic trend of industrial structure modernization (see Table 3.3).

Table 3.3 Composition of China’s GDP (2021–2035) Unit: %

Realize the agricultural modernization basically. Agricultural modernization is not only an important foundation for China to basically realize modernization, and especially for a China with a population of 1.4 billion, it is also the biggest shortcoming of China’s modernization. China’s basic national conditions of a large population, little arable land, and few water resources have not changed. China’s freshwater resources only account for 6.5% of the world’s share,⁷¹ agricultural land only accounts for 11.0% of the world’s total,⁷² and the cultivated land area is only 3/4 of that of the United States.⁷³ The total population still accounts for 18.2% of the world’s total.⁷⁴ The demand for agricultural products also continues to grow. From the perspective of development trends, the added value of the primary industry continues to grow, with an average annual growth rate of around 3%, which basically meets the needs of 1.4 billion people for agricultural products. At the same time, the proportion of agricultural added value in GDP will continue to decline—from 7.3% in 2021 to below 5% in 2035. The share of agricultural employment has also continued to decline. By 2035, a modern agricultural industry system will be basically established, which will become an important foundation for China’s modern economic system. First, one must ensure food security. Chinese people’s rice bowl must be firmly held in their hands at all times, and rice contained in the bowl must be mainly China-grown. China will provide a wide range of high-quality agricultural and sideline products for 1.4 billion consumers. Second, as the total number of agricultural labor force continues to decline,⁷⁵ it is expected that the total number of agricultural labor force will drop to less than 100 million by 2035. Its proportion of total employment will continue to decline, agricultural labor productivity will continue to increase, and the average annual growth rate will reach more than 4%. The narrowing of the relative gap in labor productivity levels in non-agricultural industries is also a basic way to increase the income of agricultural laborers. The third is that China’s agricultural added value ranking first in the world will be increasingly consolidated, and its proportion occupied of the world total will remain around 30% (30.3% in 2020⁷⁶). This means that China’s per capita agricultural product consumption is equivalent to about twice the world average. Fourth, the contribution rate of agricultural science and technology progress will increase from 60% in 2020 to 64%⁷⁷ in 2025, and will reach more than 70% by 2035. Fifth, greater progress will be made in agricultural mechanization. The comprehensive mechanization rate of crop cultivation and harvesting will increase from 71.25% in 2020 to 75% in 2025. The total power of agricultural machinery in China will be stabilized at around 1.1 billion kilowatts. There will be improvement in the mechanization of commercial crop production, acceleration in the development of the mechanization of livestock and poultry aquaculture, active promotion of the mechanization of primary processing of agricultural products, acceleration in the improvement of the shortcomings of agricultural mechanization in hilly and mountainous areas, acceleration in the promotion of intelligent, green, and mechanization agriculture, and expansion and strengthening of the industrial chains and industrial clusters of agricultural mechanization. By 2035, the production of major crops will be fully mechanized throughout the entire process, agricultural production will be basically mechanized, and the layout will be formed that mechanization supports agricultural and rural modernization in an all-round and high-quality way.⁷⁸ In the future, China’s agricultural modernization will achieve a higher level, and its basic position in the national economy will become more prominent, ensuring 1.4 billion consumers’ high-quality demand for high-quality and diversified agricultural products.

Basically, realize the modernization of the service industry. The proportion of the added value of the tertiary industry in GDP will increase significantly, from 53.2% in 2021 to 58.0% in 2025, and to about 65% in 2035. The tertiary industry has become the industry with the largest number of employment in China, reaching 358.06 million in 2021, accounting for 47.7% of the total employment in the country,⁷⁹ but it is still lower than the average of world (50.6% in 2019) and far lower than OECD countries (72.6%).⁸⁰ By 2035, this proportion will reach more than 2/3, which will not only absorb the new labor force, but also absorb the labor force transferred from the primary and secondary industries. In the future, the development of China’s service industry will be more knowledge-intensive and information-intensive, and it will be a key area to meet people’s growing demand for a better life.

China has entered the “era dominated by services”. In 2012, the proportion of added value of the tertiary industry exceeded that of the secondary industry, becoming the overall largest industry. The proportion of industrial added value in GDP continued to decline, from 40.0% in 2011 to 32.6% in 2021. The proportion of China’s manufacturing industry to GDP has also dropped from 32.1% in 2011 to 26.2% in 2020.⁸¹ This does not mean China is undergoing a “de-industrialization” or “de-manufacturing” process. On the one hand, it is necessary to stabilize the proportion of the added value of industry and manufacturing in GDP, and on the other hand, it is necessary to vigorously promote new industrialization. At the same time, the first, second, third and fourth industrial revolutions will be simultaneously completed, which we can label as a process of “parallel industrialization.” By 2035, the integration of the secondary industry and the tertiary industry will be higher, which is embodied in the mutual extension of the manufacturing and service industries. In particular, the development of artificial intelligence technology provides technical support for the integration of the two industries. At the same time, the integrated development of the primary industry, the secondary and tertiary industries have grown deeper. For example, the secondary industry provides equipment for the development of the primary industry, while the development of the tertiary industry will provide technological support, market support and production support for the development of the primary industry.

New industrialization will be basically realized, and a powerful modern industrial system will be built in the world. After 2011, China surpassed the United States to become the world’s largest industrial producer. By 2020, the industrial added value (USD in 2010) was USD 5.77 trillion, accounting for 26.2% of the world’s total, equivalent to 1.61 times the US’s share (16.3% in 2019).⁸² It is estimated that by 2025, the proportion of China’s industrial added value in GDP will drop to 28.2%, but it will account for 23.5% of the world’s industrial added value. By 2035, the proportion of China’s industrial added value in GDP will account for 25.5% and the industrial added value will reach 27.7% of the world’s total industrial added value. This is equivalent to 2.54 times the US industrial added value of the world’s total (10.9%). China’s industry has entered the stage of medium–high speed growth from high speed growth (above 7%), and the average annual growth rate of industrial added value from 2020 to 2035 is 4.5%, slightly higher than the world’s average annual growth rate of 4.1% (see Table 3.4). This marks the transformation of China’s industry from speed-based growth to high-quality, high-efficiency, and high value-added growth. By 2035, China will realize the major transformation from a large world industrial country to a world industrial power, which is the most important industrial foundation for China to become a world economic power.

Table 3.4 Growth of industrial added value in China, the United States and the world (2020–2035)

The world manufacturing power will be basically built. China is in the process of decreasing its proportion of manufacturing added value in GDP, from 29.0% in 2015 to 26.2% in 2020. This is higher than the proportion seen in developed countries such as the United States (10.9%, the United States). It has formed a number of world-class advanced manufacturing industries clusters. Additionally, the level of modernization of industrial chain and supply chain has been greatly improved and the level of modernization of industrial chain and supply chain has also been greatly improved.⁸³ This has allowed China to enter the middle and high end of the global value chain—China has formed a group of world-class enterprises with global competitiveness. Additionally, China has a group of the world’s most influential brands⁸⁴ and “Made in China” has approved by the world. By 2035, China will realize its transformation from a large manufacturing country to a world manufacturing power. The manufacturing industry is also one of the most important industrial foundations for China to become a world economic power.

The deep integration of the Internet, big data, artificial intelligence and the real economy will form a group of digital industry clusters with international competitiveness, and the level of digital intelligence in public services, social governance and other fields will also be greatly improved.⁸⁵ In addition, the “three new” economy has become an important economic pillar,⁸⁶ and its proportion in GDP will increase from 16.7% in 2020 to more than 1/4 in 2035.

A new type of urbanization will be realized. This will happen through adhering to the urbanization path with Chinese characteristics, accelerating the urbanization of people from rural areas, promoting the integrated development of urban clusters, and improving the spatial layout of urbanization (see Fig. 3.1). By 2035, the urbanization rate of China’s permanent population will increase from 63.9% in 2020 (which has exceeded the world’s average of 56.1%) to 78–80% in 2035, close to the level of OECD countries (81% in 2020).⁸⁷ This also marks four-fifths of the population reaching middle-income levels. Urbanization reshapes China’s economic geography, leading to the coordinated development of the world’s largest urban clusters, large, medium and small cities and small towns. The quality of cities has been significantly improved and the population urbanization rate has increased to a new level. Public services have grown to cover all permanent residents. Public security has grown to cover the actual population including domestic and foreign tourist groups, and a new type of urbanization with people as the core has been functionally realized. By 2035, China’s coastal and riverside port systems will be completer and more modernized, with a higher level of connectivity with other transportation infrastructure. The level of coordination between sea and land will grow, the scale of the marine economy and its proportion in GDP will be further increased, and the goal of becoming a marine power will be basically achieved.

Fig. 3.1

Schematic diagram of the spatial pattern of urbanization. Source “Outline of the 14th Five-Year Plan for National Economic and Social Development and the Long-Range Objectives Through the Year 2035 of the People’s Republic of China”, March 2021

Build the world’s largest market entity. The report to the 20th National Congress of the Communist Party of China clearly stated the goal of “building a high-level socialist market economic system”, which includes accelerating the construction of world-class enterprises and building a unified national market.⁸⁸ The number of market entities in China increased from 490,000 in the early stage of reform and opening up to 77.469 million in 2015, and further increased to 150 million by the end of 2021. The main reasons for the vigorous development of market players are the continuous improvement of China’s marketization level and the continuous improvement of the business environment. Full play is given to the initiative and creativeness of market entities, which injects fresh impetus to China’s economy. It is necessary to build a group of world-class enterprises. In addition, the huge number of market players will inevitably give birth to a large number of large enterprises with global competitiveness. In 2010, the number of Fortune 500 companies in China was 54 (including Hong Kong, Macao and Taiwan companies, and 43 in mainland China), which will increase to 143 by 2021 (including Hong Kong, Macao and Taiwan companies, and 135 in mainland China). This has surpassed the number of companies in the United States (122).⁸⁹ To this end, the State-owned Assets Supervision and Administration Commission of the State Council proposed that Chinese central State-owned enterprises should take world-class enterprises as their development standards and work to continuously improve themselves. The development standards include: becoming a leading enterprise that dominates the allocation of international resources, a leading enterprise that leads the technological development of the global industry, and a leading enterprise that has the right to speak and influence in the development of the global industry; leading in efficiency, efficiency and quality; becoming a model of practicing green development concept, a model of fulfilling social responsibilities, and a model of a world-renowned brand image. At the 24th meeting of the Central Committee for Comprehensively Deepening Reforms, the “Guiding Opinions on Accelerating the Construction of World-Class Enterprises” was reviewed and approved. General Secretary Xi Jinping pointed out: “We are accelerating the construction of a group of world-class enterprises with excellent products, outstanding brands, leading innovation and modern governance.”⁹⁰ Among the Fortune Global 500 in 2021, the number of central State-owned enterprises increased from 43 in 2012 to 47 in 2022, and the main efficiency indicators of central enterprises in industries such as power generation, shipping, and ships reached world-class levels. There are 95 state-owned enterprises in total.⁹¹ The number of central State-owned enterprises that have entered the Global 500 2022 has increased from 13 in 2012 to 21 in 2022. They have created a number of national business cards with independent intellectual property rights such as high-speed rail, nuclear power, and UHV. A number of corporate brands with industry influence and an established reputation have been cultivated.⁹² It is expected that by 2035, the number of China’s Fortune Global 500 companies will continue to increase. Both history and the future prove: if there is prosperous enterprise, there will be a prosperous country; if there is strong enterprise, there will be a strong country.

By 2035, the unified, open, competitive and orderly market system, income distribution system, urban and rural regional development system, green development system, and comprehensive opening-up system will be more complete. The construction of a modern economic system will provide important support for the basic realization of modernization.

We will build a new system of a comprehensive and open economy, and integrate into the global economy in a larger scale and more deeply manner. China will significantly enhance the comprehensive strength and competitiveness of its foreign trade, consolidate its position as the largest trader in goods, implement a comprehensive opening-up import promotion strategy, accelerate the transformation from export-oriented growth to import-oriented growth, and become the world’s largest importer of goods as soon as possible.⁹³ China is actively expanding and improving the consumption welfare of domestic residents and the production welfare of market entities.⁹⁴ A large “Chinese Market” will provide services to more than 240 countries and regions in the world and will achieve a basic balance between import and export of goods (the proportion of current account surplus against GDP will be less than 1.0%). China will significantly improve its ability to export services to foreign countries, provide “Chinese services” to the world, and achieve a basic balance between service imports and exports. It will significantly enhance the strength and competitiveness of Chinese foreign investment, providing “Chinese investment” to the world, and achieve a basic balance between attracting foreign capital and foreign investment. It will accelerate the liberalization of trade and investment services to achieve a basic balance of international payments and accelerate the internationalization of the CNY to effectively reduce USD foreign exchange reserves. It will vigorously support the overall rise of emerging market countries and southern countries, and actively promote the high-quality development of the joint construction of the “Belt and Road.” Connecting the dual circulation for domestic and foreign markets and through the construction of the open domestic economy and international economy, China will build a trade and investment economy and technological community. There will be continuing efforts to strengthen macroeconomic policy coordination with international institutions, effective handling of various international economic and financial crises, and full play will be given to the world’s largest economic growth engine and macroeconomic stabilizer as the largest free trade country in the world.

3.6 Entering the Forefront of the World’s Innovative Countries

On March 13, 2021, the “Outline of the 14th Five-Year Plan for National Economic and Social Development and the Long-Range Objectives Through the Year 2035 of the People’s Republic of China” (hereinafter referred to as the “Outline of the 14th Five-Year Plan and the Long-Range Objectives Through the Year 2035”) proposed the following: by 2035, the goal of China’s scientific and technological development is that its scientific and technological strength will jump significantly, key core technologies will achieve major breakthroughs, and China will enter the forefront of innovative countries.⁹⁵ In particular, the general goal of China’s scientific and technological innovation proposed by General Secretary Xi Jinping’s investigation in Fujian was set to “enter the world’s first phalanx of scientific and technological development”.⁹⁶ The report to the 20th National Congress of the Communist Party of China once again clearly stated that by 2035, China’s scientific and technological strength will increase significantly with great self-reliance and strength in science and technology. We adhere to the facts that science and technology are the primary productive forces, talent is the primary resource, and innovation is the primary driving force. We must thoroughly implement the strategy of rejuvenating the country through science and education, the strategy of strengthening the country with talents, and the strategy of innovation-driven development. We must open up new fields and new tracks for development, and constantly actively work to shape new development momentum and new advantages.⁹⁷

I quantitatively evaluated the leap-forward development of China’s scientific and technological strength from 2000 to 2020. China has shifted from a technological catch-up country to a technological innovation country, from the second phalanx of the world’s science and technology to the first phalanx, from the accumulation of quantity to the leap of quality, all achieving a historic leap forward. These developments fully reflect the political advantages of the Party’s overall leadership, the advantages of the national innovation-driven development strategy, the new national system under the socialist market economic system, the scientific and technological human resources, and the domestic market scale.⁹⁸ Technology has become the primary productive force, and innovation has become the main driving force.

Increase the intensity of R&D investment and become the world’s largest R&D investor. The total amount and growth rate of R&D expenditure and its proportion in GDP are key indicators reflecting a country’s technological innovation capability. The ratio of China’s R&D expenditure to GDP (that is, R&D expenditure) increased from 1.0% in 2000 to 2.44% in 2021. According to the calculation of GDP (PPP, international dollar in 2017) and R&D expenditure intensity in the World Bank database, China’s R&D expenditure has increased from 45.1 billion international dollars in 2000 to 552 billion international dollars in 2020, with an average annual growth rate of 13.3%. This is 11.0% points higher than the average annual growth rate of the United States (2.3%). China is the country with the fastest growth in R&D expenditure in the world. The elasticity coefficient for GDP growth is as high as 1.264, that is, the average annual growth rate of GDP has increased by 1 percentage point, and the average annual growth rate of R&D expenditure is increased by 1.264 percentage points. In 2021, China’s total R&D investment reached CNY 2.79 trillion, equivalent to 607.1 billion international dollars, surpassing the United States for the first time (560.8 billion international dollars in 2020). The “14th Five-Year Plan” proposed for the first time that “the R&D investment of the whole society will increase by more than 7% annually, and we will strive to make the investment intensity higher than that of the ‘13th Five-Year Plan’ period”. It is expected that the R&D investment intensity will reach more than 2.6% by 2025, reaching the average level of OECD countries (2.6% in 2018⁹⁹). By 2030, it will reach more than 2.8% and increase to more than 3.0% by 2035, higher than that of the United States (2.8% in 2018).¹⁰⁰ It is estimated that the proportion of China’s R&D expenditure in the world will increase from 1/5 in 2020 to 1/4 in 2035, reaching 1.6 trillion international dollars, equivalent to 1.78 times that of the United States, accounting for 1/4 of the world’s proportion (see Table 3.5). This will allow China to assume a ranking of first in the world, still maintaining an obvious comparative advantage and forming a strong competitive advantage. The state supports basic research in a long-term and stable manner, and encourages the whole of society, especially enterprises, to invest in basic research. There will be an increase in the proportion of basic research in total R&D expenditure from 6.1% in 2021 to more than 8% in 2025, and it will reach more than 10% by 2030. According to the statistics of the Web of Science database, from 2012 to 2021, the number of scientific research papers published in China showed a continuous growth trend, ranking second in the world for 10 consecutive years. In May 2021, China surpassed the United States and ranks first in the world.¹⁰¹ This all has made China one of the largest science centers in the world, building several global science and technology innovation centers.¹⁰²

Table 3.5 R&D expenditures in China and the United States and their share of the world total (2020–2035)

China is strengthening its national strategic scientific and technological might and adhering to the core position of innovation in China’s overall construction.¹⁰³ The national innovation system is more complete, and it has long-term and stable support to build a number of world-class scientific research institutions and innovative enterprises, becoming the world’s largest innovation center and R&D base. China will improve new whole-nation systems, help implement a number of forward-looking and strategic national major scientific and technological projects, and advance the deployment of cutting-edge technology and disruptive technology research and development. National scientific and technological teams such as the Chinese Academy of Sciences have become an important part of the national strategic scientific and technological strength, representing the highest level of scientific and technological innovation in China. The country should steadily strengthen investment and support, especially in major basic research frontiers and key areas to achieve major breakthroughs. At present, colleges and universities have established more than 60% of the national key laboratories, gathering more than 60% of the national high-level talents, and undertaking more than 80% of the National Natural Science Foundation projects of China. In the field of higher education, following the “211 Project” and “985 Project”, the “First-class universities and disciplines of the world” has been implemented, and National and local governments have worked together to jointly built a number of world-class universities and first-class disciplines, especially offering support for the development of high-level research-oriented universities and cultivating an increasing number of basic research talent. China continues to expand the scale of graduate students, doctoral students, and postdoctoral fellows, giving full play to the strengths of research-oriented and applied-oriented universities, and strengthening the cultivation of research-oriented (academic) and application-oriented talent (such as professional degrees) that are large-scale, innovative and competitive. In line with the goal of more universities and disciplines entering the world’s leading ranks in 2030 and the goal of building China with strong education and talents in 2035, it is necessary to formulate a second national medium and long-term talent development planning outline, according to “We will speed up efforts to build a contingent of personnel with expertise of strategic importance and cultivate greater numbers of master scholars, science strategists, first-class scientists and innovation teams, young scientists, outstanding engineers, master craftsmen, and highly-skilled workers.” proposed in the report to the 20th National Congress of the Communist Party of China.¹⁰⁴

Achieve major breakthroughs in key core technologies. Take the lead in the world in major emerging strategic science and technology fields, and create more original achievements that have an important impact on the development of world science and technology and the progress of human civilization. China will adhere to the path of independent innovation with Chinese characteristics, make major breakthroughs in key common technologies, cutting-edge leading technologies, modern engineering technologies, and disruptive technological innovations, realize independent and controllable key core technologies,¹⁰⁵ and overcome major bottlenecks restricting national defense science and technology; implement strategies of invigorating the country in major fields, and build a world power in space, information, network, intellectual property, etc.

Build the world’s largest knowledge-intensive industry. At present, the number of trademark registrations, patent ownership and international patent applications in China has ranked first in the world for many years. The knowledge-intensive service industry has become an important pillar industry in China and its added value has increased from 20% to about 1/4 of GDP. Among them, patent-intensive industries have become one of the most important knowledge-intensive service industries in China. In 2020, the added value of patent-intensive industries in China has reached CNY 12.13 trillion, accounting for 11.97% of GDP and 15.7% of contribution rate to GDP growth¹⁰⁶; by 2035, its proportion in GDP will reach more than 16%,¹⁰⁷ and the contribution rate to GDP growth will reach more than 20%. This will lead to it becoming an important support for high-quality economic development. According to the national “14th Five-Year Plan”, the indicator of invention patents per 10,000 population is no longer adopted, but the indicator of high-value invention patents per 10,000 population will instead be used.¹⁰⁸ This value will increase from 6.3 in 2020 to 12 in 2025.¹⁰⁹ The total number of high-value invention patents will increase from 889,000 to 1.72 million, and China will strive to double the value again by 2035. China has become the country with the largest number of international patent applications under the Patent Cooperation Treaty (PCT)¹¹⁰ and continually strives to more than triple the international patent applications by 2035 to about 200,000. This will help provide the world original Chinese technological inventions, technological innovations and technological applications and help China become an important contributor to the world’s scientific and technological progress.

Build the world’s largest digital economy. China has built the world’s largest optical fiber and fourth-generation mobile communication (4G) network, and the construction and application of fifth-generation mobile communication (5G) network is accelerating. The penetration rate of broadband users has increased significantly, with fiber users accounting for more than 94%, mobile broadband users reaching 108%, and the number of active Internet Protocol Version 6 (IPv6) users reaching 460 million, becoming a main technology for the development of the digital economy. The digital economy is the main economic mainstay after the agricultural economy and the industrial economy. It takes data resources as the key element and utilizes modern information networks as the main carrier. The digital transformation of various areas has become an important driving force to promote this new economic development model that is more unified with stronger elements of fairness and efficiency. According to the “a plan to facilitate development of the digital economy in the 14th Five-Year Plan period (2021–2025)”, by 2025, the digital economy will enter a period of comprehensive expansion, and the added value of the core industries of the digital economy will account for 10% of GDP,¹¹¹ making it an important pillar industry and basic industry in China. The penetration rate of industrial Internet platforms will reach 45%, the national online retail sales will reach CNY 17 trillion, and the scale of e-commerce transactions will reach CNY 46 trillion. The ability of digital innovation to lead development has been greatly improved. The level of intelligence has been obviously strengthened and remarkable progress has been made in integrating digital technology with the real economy. The digital economy governance system has further improved, and the competitiveness and influence of China’s digital economy have steadily increased. By 2035, the digital economy will have moved towards a period of prosperity and maturity, forming a modern market system for the digital economy that is unified, fair, competitive, and mature. The basis of digital economy and the development level of industry system enter the forefront of the world.¹¹² By guiding the high-quality development of the entire national economy and society with the digital economy, the world’s largest country with a digital economy, a digital society, digital schools, a digitally advanced government, and digital families will be built.

Build the world’s largest domestic technology market. The rapid growth of China’s technology market transaction volume has become one of the important symbols of an innovative world power. The transaction volume rose from CNY 65.1 billion in 2000 to CNY 2,825.2 billion in 2020, equivalent to 43.4 times the value of 2000, maintaining an average annual growth rate of 20.7%. This is also significantly higher than the average annual growth rate of R&D expenditure, equivalent to an increase in the ratio of GDP from 0.65% to 2.79%, which is already higher than the ratio of R&D expenditure to GDP (2.40%). The positive interaction between R&D investment and technology market output economic benefits will be formed and will exceed the initial level of R&D expenditure. It is expected that China will develop into the world’s largest R&D industry system and technology market system by 2025. According to the “Outline for Building a Country Strong on IPR (2021–2035)” (September 2021), by 2035, China’s comprehensive competitiveness in intellectual property will rank among the top in the world, the intellectual property system will be complete, intellectual property will promote the vigorous development of innovation and entrepreneurship, the awareness of intellectual property rights in the whole society will have basically taken shape, the international cooperation pattern of comprehensive and multi-level participation in the global governance of intellectual property will have been basically formed, and a strong intellectual property country with Chinese characteristics and world-level intellectual property will have been basically established.¹¹³ China will become the world’s largest international technology market to make large contribution to worldwide innovation.

Enter the forefront of innovative countries in the world. China’s economy has shifted from a stage of high-speed growth to a stage of medium–high-speed growth, and it will further downshift to a medium-speed growth stage in the future. Although the economic growth rate has declined, the supporting role of scientific and technological innovation on economic development has become increasingly prominent, and the economic growth model has gradually changed from being factor-driven to innovation-driven. It will play a fundamental supporting role in the development goal of basically realizing modernization. To this end, the first step is to reiterate the goal of realizing the modernization of science and technology as the core goal of basically realizing socialist modernization. With the core strategic goal of building an innovation-oriented country, China must give full play to the fundamental supporting role of scientific and technological modernization in realizing economic modernization, and lead its economic modernization with scientific and technological modernization. The second is to use 10 years to achieve the target of “science and technology indicators multiplying”, that is, to double the main science and technology development indicators in 10 years, with an average annual growth rate of 7.2%, which is higher than the economic growth rate. It will be considered as the anticipated target. The status and strength of the world’s scientific and technological power will be further improved. China will basically achieve scientific and technological modernization by 2030, and enter the forefront of innovative countries by 2035. The third is to start to formulate the second outline of the national medium- and long-term program for science and technology development and the outline of the national medium- and long-term talent development plan. This involves putting forward guidelines, formulating the overall goals, specific indicators and overall arrangements for 2025, 2030 and 2035, defining major innovation projects and key projects, making science and technology the primary productive force, making innovation the primary driving force for development, and putting science and technology the primary strength of the country. China will achieve a major transformation from a world large country with science and technology to a world science and technology power enter the forefront of the world’s innovation countries, and make a huge contribution to the world’s scientific and technological innovation.¹¹⁴

3.7 Building the World’s Largest Modern City

The level of urbanization in China has improved significantly. The total urban population has increased from 722 million in 2012 to 914 million in 2021, an increase of 192 million, equivalent to 27.0% of the world’s urban population increase of 710 million in the same period.¹¹⁵ It has also become the biggest engine driving China’s economic and social changes and urbanization in the world. China’s urbanization rate has increased from 53.10% in 2012 to 64.72% in 2021, which is higher than the world’s average urbanization level (57%)¹¹⁶ and exceeds the expected target proposed by the “National New Urbanization Plan (2014–2020)” that the urbanization rate of the permanent population in 2020 is about 60%, which is equivalent to an increase of 56.48 million urban permanent residents. Among them, there are 16 cities with an urban permanent population of more than 10 million. China has accelerated the implementation of a strategic pattern of urbanization featuring “two horizontal and three vertical axes”.¹¹⁷ In 2017, the national urban built-up area reached 56,225 km², accounting for only 0.58% of the country’s land area (9.6 million km²), carrying two-thirds of the total population and producing 90% of total GDP. China’s urban infrastructure capacity and service level have been continuously improved, the comprehensive urban carrying capacity has gradually increased, the urban living environment has been significantly improved, and the quality of life of the people has continued to improve—reaching the level of medium-developed countries. In 2020, China had 493 thousand km urban roads, with the operating mileage of urban rail transit reaching 6600 km which is 1.20 times the figure in 2015. By the end of 2021, 51 cities across the country have constructed and operated urban rail transit systems and online car-hailing has now covered more than 300 cities above the prefecture level in China. The average daily reservation amount is about 21 million.¹¹⁸ The water penetration rate has increased to 99.0%, exceeding the original target of 90%. The urban sewage treatment rate has reached 97.5%, the urban gas penetration rate has reached 97.9%, the harmless treatment rate of domestic waste has reached 99.7%, and the green area rate in the built-up areas has reached 38.2%.¹¹⁹

In the future, in accordance with the requirements of the report to the 20th National Congress of the Communist Party of China: China will advance people-centered new urbanization and work faster to grant permanent urban residency to eligible people who move from rural to urban areas. China will leverage the role of city clusters and metropolitan areas to promote coordinated development of large, medium, and small cities and push forward with urbanization that is centered on county seats. Guided by the principle that cities should be built by the people and for the people, China will improve urban planning, construction, and governance, move faster to change the development models of super-large and mega cities and carry out urban renewal projects and improve urban infrastructure to build livable, resilient, and smart cities.¹²⁰