China remaining largest contributor of global growth not a belief but pure algebra

Global Times: China’s focus on new quality productive forces drives economic growth, boosting global impact.

Beijing, china, March 12, 2025 (GLOBE NEWSWIRE) -- The "two sessions" are not only a major political event in China but also a key window for the world to observe the country's democratic politics and development trajectory. This year, as in years past, the event has captured considerable global attention, highlighting China's ongoing development and its implications for the world stage. In the "Unraveling the allure of China" series, the Global Times (GT) invites experts and scholars from around the world to delve into the multifaceted allure of China and explore how the lessons drawn from its unique experiences can provide valuable insights for other nations.

In the sixth piece of the series, Global Times reporter Wang Wenwen talked to Margit Molnar (Molnar), head of the China Desk of the OECD Economics Department, about the significance of new quality productive force in maintaining China's economic growth and the effect the Chinese economy continues to have on the world economy.

GT: The government work report delivered by Chinese Premier Li Qiang at the opening of the third session of the 14th National People's Congress on March 5 said that in 2024, solid headway was made in pursuing high-quality development and fostering new quality productive forces. The report also listed developing new quality productive forces in light of local conditions and accelerating the development of a modernized industrial system as a major task in 2025. Why do you think China attaches such great importance on new quality productive forces?

Molnar: Factor-accumulation based growth is no longer an option for China, only productivity growth can secure sustained and steady economic growth. Since a few years ago, more attention has been paid to the quality of growth instead of purely its rate.

This is a crucial switch of strategies toward sustainability in the longer term. However, the rate of growth is not something that can be completely ignored, as it is growth that creates employment and raises incomes. For that reason, it is the right choice to shift the focus on how to boost productivity. And there is ample room to do so, as the productivity gap with the frontrunner is sizeable, in particular in services, while it is smaller in manufacturing. Upgrading of the factors of production, including the capital stock and upskilling the labor force as well as adopting structural reforms, could all lead to stronger productivity growth. China's national program of promoting large-scale equipment renewals and replacing old consumer goods with new ones will enable greater productivity growth in the longer term. However, the large-scale investment in new equipment during the programs is a way of frontloading replacement investments, and in turn this will likely lead to lower investment in the coming couple of years. To compensate for that, other growth-enhancing measures, notably structural reforms, are needed.

GT: New quality productive forces have been a buzzword at this year's two sessions. What new proposals or policy suggestions are you expecting from this year's two sessions?

Molnar: As I see it since its inception, the term "promoting new quality production forces" to me means boosting productivity. This is the only way economic growth can be achieved in a sustainable way. I would expect the two sessions to bring about more structural reforms that would ensure that the growth of productivity and that of the economy are sustained. While the impact of demographics weighs heavily on China's growth prospects, the good news is that through well-designed structural reforms there is room to boost the country's growth potential, which could potentially lift productivity. Moreover, including reforms that boost competition will have a positive effect on growth, a proven fact.

Such reforms include further opening to foreign capital. As we saw recently, restrictions in the manufacturing sector have been removed entirely. China has also said that it will continue to relax market access restrictions for the services sector.

GT: AI is empowering new quality productive forces in all aspects, from multiple angles and over a long period of time. China's AI development is advancing very fast. How can China's AI model drive its economic growth?

Molnar: China is undoubtedly a frontrunner in AI and its applications are spreading to an increasing number of fields. AI can potentially boost economic efficiency as it frees up human resources to perform complex tasks that AI is not able to perform currently. Its data-processing ability enables managers to make better-informed decisions and reduce costs of business processes across the spectrum, just to mention a few channels through which AI affects growth.

A widespread adoption of AI is for sure one of those tools that can boost productivity and hold up growth in the medium term. To ensure strong growth in the long term, more innovation with large impact, such as AI, would be needed.

GT: In previous interviews, you voiced optimism of the Chinese economy and said you believe that China continues to be the driving force of the world economy. What makes you so confident? How do new quality productive forces promoted by China boost the world economy?

Molnar: It is not a belief but pure algebra. In the past decade or so, China's contribution to global growth was close to 30 percent. The size of China's economy and its growth rate jointly make it the largest contributor. Let's not forget that China's economy is the second largest in the world and its growth rate is higher than those in other large economies. Even though there are some emerging growth poles around the globe with bright population prospects, the size of those economies is currently very small and even with high growth in the coming few years, they are unlikely to catch up with the frontrunners. Assuming that China's economy will slow only very gradually over the next 20-30 years as its per capita income approaches that of the OECD average, China will very likely remain the major driver of global growth in the medium term. To ensure a gradually slowing growth, there is ample room for structural reforms that could keep the growth potential relatively high over the coming decade or two. China's growth is fueling growth in other countries through its tight integration into production networks and by being a major trading country as well as investment destination and investor. In the past decade or so, Chinese innovation has also been contributing to the growth of other countries.

This article first appeared in the Global Times:

https://www.globaltimes.cn/page/202503/1329837.shtml

Company: Global Times

Contact Person: Anna Li

Email: editor@globaltimes.com.cn

Website: https://globaltimes.cn

City: Beijing

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