Recently, Professor Yu Miaojie, Fellow of the International Economic Association (IEA) and President of Liaoning University (LNU), was interviewed by Hubei Daily. The interview also featured Zheng Yongnian, Dean of the School of Public Policy, The Chinese University of Hong Kong, Shenzhen; Zhang Yansheng, former Secretary-General of the Academic Committee of the National Development and Reform Commission; and Professor Zhang Jianhua, Dean of the School of Economics and Peikang Chang Institute for Development Studies at Huazhong University of Science and Technology. Professor Yu Miaojie’s interview is reproduced below.
Strategically Navigating Chinese Modernization to Write a New Chapter of the “Two Miracles”
International division of labor is a chain, which is now shortening while exhibiting features of industrial agglomeration — a shift from the chain-like nature of value chains to regional block-like patterns of industrial clustering.
Consumption needs to be “cultivated,” which means it cannot be boosted overnight or simply by handing out cash or vouchers; rather, it requires time.
Going forward, China’s opening-up will not be passive. Instead, it will benchmark against high-standard opening-up requirements, expand institutional opening-up, and actively transform from a “follower” into a “frontrunner.”
Reporter: In the grand blueprint of advancing Chinese modernization, how should we understand the strategic position of the 15th Five-Year Plan period?
Yu Miaojie: The 15th Five-Year Plan period holds a crucial role in connecting the past and the future in the process of basically realizing socialist modernization. Whether we can achieve the goal of reaching the per capita GDP level of moderately developed countries by 2035 depends critically on the next five years.
The main goals and twelve strategic tasks of the 15th Five-Year Plan period all serve the Second Centenary Goal of building a great modern socialist country that is prosperous, strong, democratic, culturally advanced, harmonious, and beautiful. In the concrete implementation of the twelve strategic tasks, it is essential to fully, accurately, and comprehensively implement the new development philosophy. This philosophy is not a phased strategy but rather the underlying logic guiding Chinese modernization: innovation is the primary driver, coordination is an inherent feature, green development is the ecological foundation, opening up is the necessary path, and shared benefits represent the ultimate value.
Prosperity means achieving significant progress in high-quality development; democracy aligns with the in-depth advancement of whole-process people’s democracy; civility reflects a notable elevation in societal civility levels; harmony is achieved by enhancing regional coordination, urban-rural integration, and industrial synergy to realize high-quality development and continuously improve people’s quality of life; and beauty signifies major advancements in the Beautiful China Initiative.
It is important to emphasize that prosperity is the primary goal in building a modern socialist country, highlighting the commitment to prioritizing economic development and ensuring high-quality economic and social progress over the next five years. In my view, the guiding role should be exercised in three key areas: on the supply side, the focus should be on building a modern industrial system; on the demand side, the emphasis should be on accelerating the creation of a unified national market; and on the price front, it is essential to leverage the decisive role of the market while upholding and improving the basic socialist economic system. Regarding the goal of civility, greater emphasis should be placed on cultural confidence in the future, consistently guided by Xi’s Thought on Culture and adhering to the “Two Integrations.” In terms of green development, the share of non-fossil energy consumption in China has increased from 15.3% in 2019 to 19.8% by the end of 2024, with an average annual increase of nearly one percentage point. By the end of the 15th Five-Year Plan period, namely 2030, this share is expected to reach 25%, smoothly achieving the carbon peaking goal before 2030. This is the direction we must continue to strive toward.
Reporter: By 2035, China aims to achieve the goal of reaching the per capita GDP level of a medium-developed country. What risks and challenges will the “15th Five-Year Plan” period face, and how can strategic resolve be maintained?
Yu Miaojie: Over the next five years, the greatest uncertainty lies in external risks and challenges. In particular, the narrow-minded isolationism and “my country first” policies promoted by some nations pose significant challenges to economic globalization and political multipolarity. Additionally, the challenge of an aging population has become a global issue. China can gradually mitigate this impact by developing a “silver economy” and elderly-care industries, while also refining its population policies to address the situation.
In the coming five years, Sino-U.S. economic and trade competition will persist over the long term. In my view, this competition is a protracted battle. From a long-term perspective, China has the capability to prevail in this contest.
By “protracted battle,” I mean that we do not seek to resolve the issue in a single decisive engagement. Whether we counter or not, and to what extent, ultimately depends on how our actions serve the broader goals of national rejuvenation and the building of a strong modern socialist country, ensuring that the advancement of Chinese-style modernization remains uninterrupted and unimpeded.
Assuming the Chinese economy grows at an annual rate of 4.5% (or possibly higher), while the U.S. economy grows at its peak rate of 2.5%, and based on the current exchange rate of the renminbi, in about ten years—by 2035—China’s total economic output is likely to surpass that of the United States. This would also allow China to successfully achieve the strategic goal of “reaching the per capita GDP level of a medium-developed country.” I believe China is fully capable and confident of realizing this goal. At the same time, we must be clear-eyed that the process of achieving this objective will be arduous and require tremendous effort.
Reporter: Where does this confidence and assurance come from?
Yu Miaojie: Despite the turbulent and high-risk external environment, the resilience of China’s economy has grown increasingly robust. In my personal view, China possesses five distinct advantages.
Firstly, the advantage of a complete industrial chain. From the supply side, China has established a comprehensive industrial system encompassing 41 major industrial categories, 207 medium categories, and 666 sub-categories, making it the only country in the world to possess all industrial classifications designated by the United Nations.
China also holds a clear advantage in industrial clustering. The division of labor among different countries forms a chain, and while this chain is now shortening, it has given rise to the characteristic of industrial clustering. This shift has transformed the linear nature of the value chain into regional block-like features of industrial agglomeration. Through industrial clustering, Chinese enterprises can “huddle together for warmth,” reducing fixed costs and achieving increasing returns to scale.
Simultaneously, China is becoming a global manufacturing hub. Chinese manufacturing is no longer traditional low-end manufacturing but is steadily climbing toward mid- and high-end manufacturing.
Furthermore, the Fourth Plenary Session of the 20th Central Committee pointed out that building a modern industrial system requires “optimizing and upgrading traditional industries, while cultivating and strengthening emerging and future industries.” Optimizing and upgrading traditional industries is placed first, which requires us to recognize that traditional industries cannot be simply defined as sunset industries. There are no so-called sunset industries, only sunset technologies. By updating sunset technologies to empower traditional industries, they can be transformed into sunrise industries.
Secondly, the advantage of a supersized market. Chinese modernization is, first and foremost, the modernization of a huge population. The market brought by China’s population of over 1.4 billion is enormous. At the same time, the consumption blue ocean formed by the 400 million middle-income group is a growth engine unmatched by any other country. China is accelerating the creation of a unified national market, increasing the proportion of domestic trade to GDP, and forming a new “dual circulation” development pattern with the domestic cycle as the mainstay, which can further release market dividends.
Thirdly, a significant talent advantage. China produces 12 million university graduates and 8 million skilled talents annually, forming the most solid talent foundation for innovation—an advantage unique in the world. In recent years, China has particularly emphasized building a strong education system, promoting the integrated development of education, technology, and talent. The dividends of education’s political, people-oriented, and strategic attributes are continuously being released. China’s increasingly promising development prospects and ecological civilization are also attracting talents from around the world to come to China to start businesses.
Fourthly, the refinement of institutional mechanisms. The advantages of the new nationwide system, the strong and effective leadership of the Party Central Committee, the efficiency of operating with a “whole nation chessboard” approach, and the combination of an effective market and a proactive government can achieve a dynamic balance between fairness and efficiency, ensuring decisions are implemented vertically to the grassroots and horizontally across all areas.
Fifthly, cultural advantages. Chinese civilization is the only civilization in human history that has never been interrupted, possessing remarkable resilience and cohesion. Chinese civilization particularly emphasizes “harmony in diversity” and “common good for the world,” embodying a foundation of global-mindedness without the narrow isolationism of rejecting other civilizations. The Chinese approach emphasizes building a community with a shared future for mankind, achieving equal and orderly world multipolarization, and inclusive and universally beneficial economic globalization. This aligns with the world’s people’s yearning for a better and peaceful life and, compared to the narrow “my country first” approaches of some nations, will inevitably "gain widespread support.”
Reporter: Advantages are not static, but continuously demonstrate their role in fortifying the “protective moat” for China’s economic and social development. For instance, building a modern industrial system and consolidating and strengthening the foundation of the real economy is the primary task during the 15th Five-Year Plan period. Can persisting in focusing the main emphasis of development on the real economy also be seen as our advantages taking root in Chinese soil, branching out, blossoming, and bearing fruit?
Yu Miaojie: Yes. Advantages are not just slogans; they play a concrete and vibrant role in economic and social development. The Plenary Session clearly identified the real economy as the foundation and called for accelerating the building of a manufacturing powerhouse, a quality powerhouse, a space powerhouse, a transportation powerhouse, and a cyber powerhouse. A manufacturing powerhouse is the foundation, with the goal of consolidating the foundation for national strength through the improvement of product quality. Standard setting is the key lever for quality improvement. A quality powerhouse is also a “standards powerhouse.” For many emerging fields, whoever sets the standards essentially holds the discourse power in that domain. In the past, China merely participated in the formulation of international standards in many areas, aligning with and benchmarking against them. In the future, China must become a setter and leader of international standards. In concrete implementation, the “sky” (space), the “ground” (transportation), and the “unseen” (cyberspace) collectively serve the real economy, thereby forming a three-dimensional framework supporting the high-quality development of the real economy.
Reporter: The Proposals for the 15th Five-Year Plan dedicate a separate chapter to the strategic task of “accelerating high-level self-reliance and self-improvement in science and technology to lead the development of new quality productive forces.” What is the deeper consideration behind this?
Yu Miaojie: Innovation is the primary driving force, encompassing both narrow and broad senses. Innovation in the narrow sense refers to technological innovation.
Technological innovation includes two aspects: First, original innovation from 0 to 1, which is the creative process from nothing to something, the blueprint stage, requiring dedicated efforts from large research institutions and scientists. Second, technological improvement from 1 to N, the stage from blueprint to laboratory to industry, primarily manifested as process improvements. Both aspects are crucial and need coordinated advancement.
Currently, regarding the progression from 1 to N, China is at the forefront globally, possessing clear comparative advantages, even absolute advantages in some areas. Leveraging its complete industrial system, China can complete this process relatively quickly, both in terms of space and time. Regarding the leap from 0 to 1, there is still a gap compared to some developed countries. However, this gap is continuously narrowing, and the late-mover advantage is relatively evident.
Many people are accustomed to using R&D intensity to measure innovation capability. During the 14th Five-Year Plan period, China’s R&D spending intensity increased to 2.68%, close to the average level of OECD countries. R&D includes both research and development. In 2024, China’s basic research expenditure accounted for 6.91% of total national R&D spending, whereas many developed countries have reached 13%, with some even reaching 15% in certain years. There is still a gap between China and developed countries in investment in original innovation. Currently, China has a greater need to achieve original innovation from 0 to 1 and increase investment in basic research; this is a shortcoming that must be addressed. Simultaneously, we observe that China’s efforts in this area are intensifying, exhibiting a dynamic landscape that reflects both long-termism and pragmatism.
Reporter: Building a strong domestic market and accelerating the establishment of a new development pattern is the third of the twelve key tasks, whose importance is self-evident. What issues should we focus on in constructing a unified national market?
Yu Miaojie: As per capita income increases, a larger population base leads to a larger economic scale. Chinese modernization is, first and foremost, the modernization of a huge population, which, to a certain extent, can also be described as the modernization of a massive market scale.
Establishing a unified national market requires a balanced approach to the relationship between consumption and investment.
In the past, China’s domestic demand was primarily driven by investment. During the 15th Five-Year Plan period, we need to accelerate the cultivation of the economy’s capacity to be driven by consumption and emphasize the importance of consumption in stimulating economic growth. The scale of consumption determines the scale of investment, and the scale of investment determines the scale of production. Ultimately, the scale of consumption is the fundamental driver of the scale of production—that is, demand creates supply.
After long-term efforts, China’s per capita GDP has already exceeded $13,000, and this figure will continue to grow in the future. If China’s price levels remain stable over the long term, the actual purchasing power of residents will become increasingly stronger, thereby achieving demand-driven supply, which in turn creates new demand. The proposals for the 15th Five-Year Plan have already articulated this clearly: “Using new demand to guide new supply, and using new supply to create new demand, promoting a positive interaction between consumption and investment, and between supply and demand.”
Reporter: Building on the development foundations laid during the 14th Five-Year Plan period, what should we focus on regarding opening up during the 15th Five-Year Plan period?
Yu Miaojie: Over the next five years, we aim to build a new pattern of comprehensive opening up that is broader in scope, wider in field, and deeper in level.
Firstly, we must use opening up to promote deeper-level reforms and drive high-quality development; we will build a unified national market, smooth the domestic economic cycle, and use the dual circulation of domestic and international markets to stimulate economic development.
Secondly, and more importantly for the 15th Five-Year Plan period, is autonomous opening up. This means that China’s future opening up will not be passive. Instead, we will benchmark against the requirements of high-standard opening up, expand institutional opening up, and proactively transition from being a “follower” to a “leader.”
How can we achieve autonomous opening up? The approach involves two key aspects: “bringing in” and “going out.” While attracting foreign investment, we will also encourage Chinese enterprises to expand globally. In this process, we should emphasize not only the “Chinese economy” but also the “economy of the Chinese people.” When General-secretary Xi Jinping worked in Zhejiang, he previously mentioned the concept of the “Zhejiang people’s economy,” referring to the ubiquitous presence and activity of Zhejiang people across the nation and around the world. He pointed out that the “Zhejiang economy” is geographically based, a concept of regional economy and GDP; whereas the “Zhejiang people’s economy” is people-based, more a cultural concept and a GNP concept. The “Chinese economy” emphasizes GDP, Gross Domestic Product; the “economy of the Chinese people” emphasizes GNP, Gross National Product, or GNI, Gross National Income. Figuratively speaking, it means that when Chinese enterprises invest abroad, the profits they earn still belong to those Chinese enterprises.
It is also important to note that the high-quality co-construction of the “Belt and Road” has become a highly popular global public good and international cooperation platform. The Plenary Session indicated the need to "implement the Global Development Initiative, the Global Security Initiative, the Global Civilization Initiative, and the Global Governance Initiative. The vehicle for these four major global initiatives is precisely the high-level co-construction of the Belt and Road. Through the connectivity of infrastructure, policies, trade, and finance, we will ultimately achieve people-to-people connectivity.
(Reviewed by Hubei Daily All-Media Reporter Chang Shaohua)
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