Market and consumers key to shape of things to come

Looking at the 14th Five-Year Plan (2021-25) period, I foresee five tendencies emerging in China in the next five to 15 years.

First, total factor productivity will continue to rise, driving economic growth and social development. By 2035, the total factor productivity of China will reach 65 percent of the United States'. That means over the next five years, it should increase at least by 2.5 to 3 percentage points on average each year.

The digitalization of industries, industrialization, urbanization and improvement of resource allocation efficiency will boost that process.

Second, China will move up the global value chain. There is no doubt that despite the scale of its manufacturing, the country is still at the middle and lower rungs of the global value chains. To do so, China has to promote innovation in key technologies so as to become self-reliant in the industries that concern national security.

Third, the strong domestic market and consumption will play a fundamental role. Notably, the authorities have vowed to deepen demand-side management so as to give full play to consumption as a growth engine.

Now consumption contributes about 39 percent of the country's gross domestic product, and that is expected to reach 60 percent by 2035. And over 60 percent of consumption is likely to be service consumption, for instance paying for caring for the elderly, financing services, and cultural and entertainment events and programs.

Fourth, the market will become more efficient, resource allocation will be more optimized and the rate of return on investment will increase. Increasing urbanization will create huge demands for investment, and how those demands will be met will be decided by the market, making resource allocation more efficient and effective.

Fifth, people's incomes will take a larger share of national wealth, and the rural-urban gap will be further narrowed. People's income accounts for 43 percent of the national wealth, compared with 63 percent in the US.

To let consumption play a crucial role, the State must increase the proportion of people's incomes in national wealth. In the process, the income gap and rural-urban divide must be narrowed to make development more sustainable.

－LIU QIAO, A RESEARCHER IN ECONOMICS AT PEKING UNIVERSITY