China prioritises hi-tech at ‘top of all economic policies’

China has refined its development objectives for 2035, placing a greater emphasis on technological self-reliance, national security and rural development, highlighting that Beijing is “prioritising high technology at the top of all economic policies”, analysts said.

The delivery of the highly-anticipated work report by President Xi Jinping on Sunday during the opening ceremony of the 20th party congress came at a time when China is seen to be reassessing the international environment amid technological containment efforts from the United States and geopolitical conflicts, including the Russia-Ukraine war.

The report of the speech Xi delivered in Beijing said that China will look to “significantly increase economic strength, scientific and technological capabilities, and composite national strength; substantially grow the per capita [gross domestic product] to be on par with that of a mid-level developed nation”.

The report added that China will also look to “join the ranks of the world’s most innovative countries, with great self-reliance and strength in science and technology”.

China’s 2035 development objectives are the first of a two-step goal of becoming a great modern socialist country.

The previous 2035 development vision, released together with the 14th five-year plan for 2021-25 in March last year, concentrated on breakthroughs in some core technologies in key fields and becoming a forerunner in innovation.

The previous 2035 objective of forming an obvious advantage in international competition, though, was left out of the latest report on Sunday.

“China is prioritising high technology at the top of all economic policies, echoing the technology war imposed by the US’s [Chips and Science Act],” said ING chief Greater China economist Iris Pang.

Beijing has already hit back at the law, which was signed by US President Joe Biden in August to enhance the country’s competitiveness against China.

Xi said that China has already joined the ranks of the world’s innovators as the nation’s research and development expenditure nearly tripled in the past decade to 2.8 trillion yuan (US$390 billion) last year. According to the US National Science Foundation, the United States spent US$708 billion on research and development in 2020.

China rose one place to 11th in this year’s Global Innovation Index, compiled by the World Intellectual Property Organisation last month.

Xi also mentioned breakthroughs in some core technologies in the past decade, particularly highlighting progress in space flight, space exploration, supercomputers, satellite navigation, quantum information and jumbo plane manufacturing.

Beijing introduced its dual circulation strategy in 2020, vowing to strike a balance between development and security as the external environment has deteriorated significantly amid its worsening relations with major Western countries, a weak global recovery and the negative spillover of the aggressive tightening by the US Federal Reserve.

The US Department of Commerce also released new restrictions on China’s computer chip development last week, after placing hundreds of Chinese companies on its entity list that bars access to American parts, technology or markets over the past several years.

The Biden administration described China as the “most consequential geopolitical challenge” in the post-Cold War era, suggesting all-around efforts to contain Chinese technological progress.

Beijing could use preferential taxation policies for corporations and state-backed companies to encourage hi-tech research, ING’s Pang added.

“The report makes us rethink the intensity of fiscal policies that are going to deliver on the objective of hi-tech. This means there will be a large sum of fiscal spending going into the technology industry,” she said.

The report also saw Beijing pledge to “comprehensively strengthen the national security system and national security capabilities” in addition to previous guidelines for achieving basic modernisation of national defence and the armed forces.

Beijing also plans to ensure modern standards of living in rural areas by 2035, compared to the previous general wording of significantly narrowing the gap between rural and urban living standards.

“The greater focus on science and education reveals just how much Xi is betting on innovation as a solution to China’s dimming growth outlook and its strategic dependence on Western technology,” said a report from the US-based Eurasia Group.

“Emphasis on national security reflects Xi’s elevation of security as a necessary complement to development that spans multiple policy realms, including the economy, society, and the environment.” South China Morning Post