In a recent article published in China Economic Weekly, Liu Xinghua, a distinguished professor at Tongji SEM and Director of the Chinese Center for Economic and Financial Studies under the China Institute for Innovation & Development Strategy, expressed his belief that talent is the key to creating new sources of power for China’s high-quality economic development. The published original text is as follows.

China’s economy is currently experiencing a significant historical turning point as it moves from quantity growth to quality improvement, and the new round of scientific and technological revolution and industrial transformation is changing the face of the global economy.

The sources of power for China’s rapid economic growth have been market-oriented reforms, promotion of the rule of law, demographic dividend, massive investments in energy and raw materials, institutional advantages, economic globalization, and technology spillover benefits over the 45 years of reform and opening-up under the strong leadership of the Communist Party of China. But in recent years, the elements that had been driving China’s rapid economic growth have continued to vanish or change. Looking into the future, China must discover new sources of power in order to accomplish high-quality development while sustaining a particular level of economic growth.

Beware of the “middle-income trap” and the “world’s second-largest economy trap”

The history of global economic development offers valuable insights into how to achieve both sustainable economic growth and high-quality development. Overall, the history of global economic development reveals that in human history, sustained growth in per capita GDP is a phenomenon of modern times unique to modern times, with significant growth only evident after the Industrial Revolution; countries’ rates of economic growth and levels of development have varied greatly rather than progressing simultaneously; a country’s capacity to sustain stable economic growth over the long term has largely determined its strength in the global economy, and there are very few that are able to do so; the global economy has not grown linearly, particularly in the last century due to a number of significant economic crises and political crises on a global scale, including the Great Depression in 1929 and 1930 and the two world wars, which seriously harmed the economy.

Historical experience also demonstrates that many catching-up countries frequently see an abrupt slowdown in economic growth during their economic development. Following years of rapid growth, these countries experienced an internal or external crisis, or a combination of the two, and their economies abruptly slowed down, falling quickly to medium-speed growth before abruptly transitioning into long-term low-speed or even negative growth.

There have been two major economic development traps in the world throughout the last century: the “middle-income trap” and also the “world’s second-largest economy trap”.

How to stay out of the “middle-income trap”

With a per capita GDP of USD 12,700 in 2023, what safeguards can China take to keep itself out of the “middle-income trap”?

Firstly, China should bring into full play the market’s decisive role in resource allocation.

Secondly, China should better play the role of the government.

Thirdly, China should transition from “catching up” in terms of technology to integration and innovation.

Fourthly, China should narrow the income gap.

Fifthly, China should continue to improve population quality to shift from the demographic dividend to the talent quality dividend.

Sixthly, China should develop new methods of managing and organizing enterprises.

How to break free of the “world’s second-largest economy trap”

More difficult to achieve than breaking free of the “middle-income trap”, the following six characteristics are necessary for an economy to be considered the greatest in the world.

Firstly, accomplishing significant scientific discoveries and breakthroughs;

Secondly, achieving important technological innovations;

Thirdly, promoting major innovations in enterprise management models and production patterns based on technological progress;

Fourthly, achieving important innovations in business models;

Fifthly, being able to contribute to the development of global political and economic rules; and

Sixthly, achieving innovations in institutions and ways of thinking.

The world’s current challenges and the responsibilities of great powers

The sources of power for national economic growth can be summarized and extracted from the more than 40 years of China’s reform and opening-up, the more than 100 years of the major economies’ global evolution, and the 1,000 years of human economic growth. However, gazing merely through the “rearview mirror” will not allow us to see the entire future; we also must gaze through the “windshield”. Tactic vigilance alone will not compensate for the lack of strategic insight, nor would path dependence enable us to adapt to a world full of opportunities but characterized by perpetual change and rapid evolution.

Looking into the future, a great power that is both accountable and well-respected should strive to advance the common development of all countries while fulfilling its own goals for economic development and the welfare of its citizens.

Humanity is now ushering in an era of big data, big networks, and comprehensive health, the key features of which are digital intelligence, green and low-carbon development, and increased people-centeredness. In addition to achieving harmony between man and nature, all products and services should satisfy people’s material needs and their spiritual aspirations for more safety, convenience, health, comfort, and novelty. New ideologies and institutional systems, new scientific discoveries and technological inventions, new business models and management modes, new global governance rules, and new international public goods will all result from this.

Talent, the key to creating new sources of power for China’s high-quality economic development

With the rapid development of digital intelligence nowadays, a new pattern of personalized and lifelong education, family-school-society education integration, and highly integrated offline and online education is taking shape. This new pattern places greater value on problem-solving over one-way input, comprehensive quality over single specialization, asking questions over memorization, and dynamically enhancing cognitive skills over statically mastering single skills. Only through the co-evolution of human cognitive skills and artificial intelligence can we genuinely keep up with current trends and create a better future.

Talent is the key to unlocking new sources of power for China’s high-quality economic development. Talents should not only be scientifically cultivated but also put to rational use, which are two sides of the same coin. Only by advancing the modernization of the national governance system and capacity, developing an appropriate personnel mechanism, and fostering a laid-back social environment can talents be fully developed and put to good use and a learning society and an innovative country be established.

Looking into the future, China should promote innovation in science and technology, business models, management modes, ideologies, and institutions through innovation in education, personnel mechanisms, and social governance, to not only create new sources of power for its economic development but also collaborate with other countries to advance global civilization and the economy.