Recently, at the Mingde Strategic Dialogue hosted by Renmin University of China and organized by the Chongyang Institute for Financial Studies and the School of Global Leadership, John Ross, former Director of Economic and Business Policy for the Mayor of London, remarked that during the 14th Five-Year Plan period, China achieved a historic transition: from being largely a technological follower to becoming a technological leader in major industrial sectors. This shift, he argued, is reshaping China’s relationship with the global economy.
High-quality completion of the 14th Five-Year Plan reshaped China’s relationship with the world
As China approaches the conclusion of the 14th Five-Year Plan, it has not only met its quantitative goals but, more importantly, achieved a qualitative breakthrough. What impact has this had on the world? And as China prepares to embark on the 15th Five-Year Plan, what signals does its developmental trajectory send about the global future?
The qualitative breakthrough Ross refers to is: During the 14th Five-Year Plan period, China achieved feats that few countries can accomplish: a shift from a general role as a technological follower, relying heavily on scale expansion rather than frontier innovation, to a technological leader in multiple critical industries. This transformation has reshaped China’s economic relationship with the world.
Ross cautions against exaggeration when discussing such a serious topic. The United States remains the world’s leading technological power. Yet China has already achieved leadership and continues to grow in numerous strategically significant sectors: telecommunications, electric vehicles, solar panels, wind power, drones, mass production of industrial control system cameras, batteries, parts of the consumer internet, and segments of artificial intelligence.
These are core industries that will define the future structure of global competition.
Their significance lies in the fact that the world is undergoing a long-term transition from fossil fuels to a new energy and renewable transportation system. This transformation will last for decades, and China has already secured technological leadership in several key sectors within this transition. As these industries rapidly expand, China will achieve organic domestic growth through its existing technological and industrial advantages.
This inevitably transforms China’s relationship with the global economy. China is no longer merely a supplier of mid-tech products that other countries could theoretically replace. It is becoming indispensable to critical infrastructure worldwide, including power systems and transportation networks. Against this backdrop, China’s call for higher-level opening-up positions it even closer to the center of the global economic system.
Factors China surpasses the U.S. in new-quality productive forces
Economic theory and empirical evidence indicate that two decisive factors underpin China’s development today: Technological leadership depends fundamentally on innovation, and innovation depends on R&D investment.
Ross critiques the romanticized notion that innovation comes from “lone geniuses, start-ups, or garage inventors,” and notes that the key to Silicon Valley’s technological leadership is Stanford University, one of the most powerful research institutions in the world. The core of U.S. technological leadership is not garage entrepreneurs, but the fact that U.S. R&D spending as a share of GDP has long ranked first among G7 countries.
Where does China stand in building its own R&D strength? China’s R&D spending, at 2.6% of GDP, is far higher than any other developing country, nearly double that of the second-place developing country, Turkey (1.4%). China’s R&D share surpasses three G7 economies, Canada, Italy, and France, but still trails the United Kingdom (2.9%), Germany (3.1%), Japan (3.4%), and the United States (3.6%).
Closing this gap will take time, Ross notes, because talent, not funding, is the real bottleneck.
Training a doctoral-level engineer or mathematician takes two decades. Thus, throughout the 15th Five-Year Plan and beyond, China must continue building its R&D capacity.
Secondly, the impact of R&D on growth is indirect: its real effect emerges only when embedded into fixed investment. Ross emphasizes a commonly misunderstood point: The correlation between R&D share and GDP growth is extremely low. Among the world’s ten largest economies, the correlation is actually negative, at -0.31.
The true mechanism of R&D-driven growth is through its conversion into fixed-asset investment. Among the world’s ten largest economies, the correlation between net fixed investment as a share of GDP and economic growth is 0.91, a near-perfect real-economy correlation.
In addition, China transforms innovation into products far faster than the U.S. because of its high investment level. This dynamic is particularly visible in new-quality productive forces such as green energy and efficiency-enhancing industries.
Ross argues that this point has been severely underestimated in Western discussions: “China’s lead over the United States is no longer simply a matter of percentages—it is a lead measured in absolute monetary scale.”
Ross concludes that China can continue expanding its internationally influential role in new-quality productive forces if two macroeconomic fundamentals are sustained:
China must continue increasing R&D expenditure as a share of GDP, gradually approaching U.S. levels. This cannot be achieved overnight, but is fully attainable over time.
And China must maintain its advantage in investment share of GDP relative to the United States and Western economies. This ensures that R&D can be rapidly transformed into real economic output.
Ross emphasizes that these two macroeconomic fundamentals are the pillars supporting China’s success in new-quality productive forces and its leadership in related industries and global openness.
(The viewpoints reflected in this article are exclusively the speaker's own and do not represent any official stance or viewpoint of Ecns.)
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