Industry interaction is becoming an important approach to promoting high-quality economic development. In this paper, the multi-sector general equilibrium model is developed to clarify the theoretical mechanism among industry interaction, structure transformation, and high-quality economic development; the empirical tests are carried out based on the provincial panel data from 2000 to 2017; and the empowerment paths for digital technologies are explored to drive high-quality economic development. The findings are as follows. (1) The industry interaction can promote high-quality economic development in China on the whole, but it shows a significant imbalance and a healthy two-way promotion mode have not been formed. (2) The impact of industry interaction on high-quality economic development is significantly heterogeneous at the sector and regional levels. (3) The current unhealthy industry interaction may widen the productivity gap between manufacturing and service sectors, and transform China’s economic into service-oriented structure, thus leading the economic development to a vicious circle of “low efficiency to low-end servitization and further to lower efficiency,” and hindering the sustainability of high-quality economic development. (4) Digital technologies can break the development dilemma and achieve high-quality economic development by alleviating structural contradictions, boosting healthy industry interaction, and narrowing the productivity gap among sectors. The conclusions provide empirical evidence for the government to promote the integration of advanced manufacturing and modern service sectors and achieve high-quality economic development.

Along with the changes in China’s development stage and internal and external conditions, sci-tech innovation has become the core driving force for China’s high-quality economic development in the new era. From the perspective of finance-driven technological progress, this paper constructs an endogenous growth DSGE model to analyze the relationship between financial resource allocation, technological progress, and economic growth. This study proves the counter-cyclicality of technological innovation in China, and finds that the allocation of financial resources between enterprises’ productive investment and innovation investment can affect economic growth by changing the scale of factor inputs and technological progress rate, and that there is a see-saw relationship between these two effects, with the latter dominant. On that basis, this paper explains the dynamic transmission mechanism among finance, technology and economy. During the economic expansion period, enterprises expand their production scale, financial resources provide more support to productive investment, with less support to innovation investment, thus the technological progress rate goes down; and during the economic contraction period, enterprises reduce their production scale, financial resources cut support to productive investment and turn to innovation investment, so technological progress rate goes up. The implications of this study on policy are as follows: when faced with new contradictions and challenges in the current development stage, China should get a grip on the new development pattern, seize new opportunities, further deepen financial reforms, optimize the financial resource allocation mechanism, encourage innovation investment, and give full play to the role of equity markets in supporting corporate R&D and innovation. Meanwhile, coupling with prudent and moderate macro-control policies, China should provide a positive macro-environment for corporate innovation, stimulate corporate on innovation demand, promote technological progress, and boost high-quality economic development.

As an important strategic direction of China’s 14th Five-Year Plan, strengthening demand-side management aims to build an effective system to boost domestic demand, establish a complete demand system, and develop a robust domestic market, thereby promoting the realization of the growth goals by 2035 and the second centenary goal by the mid-21st century. Different from traditional aggregate demand management, demand-side management introduces a host of new attributes pertaining to its regulatory scope, regulatory goal, regulatory strategy, regulatory target, and regulatory instrument. Demand-side management does not seek to replace aggregate demand management; rather, both assume pivotal roles in macro-control and their coordination are of utmost importance. In real scenarios, demand-side management should synergize with supply-side structural reform, which is helpful to foster a new development pattern with domestic circulation as the mainstay and domestic and international circulations reinforcing each other. To effectively implement demand-side management, it is imperative not to replicate the approach used in aggregate demand management. Only by further innovating and improving the macro-control system with Chinese characteristics and coordinating the stability policy, growth policy and structural policy can the demand-side management be truly implemented under the new framework of “Macro-policy Trinity.”

Modernizing the industrial system is an integral and strategic priority within the broader scope of modernizing the economic system. It demands a focus on boosting China’s labor productivity and self-sufficiency rate of key technology products, with the aim to advance industrial upgrading and optimize the industrial structure. Hence, China must promote the strategy to expand domestic demand and accelerate the creation of a new development pattern from the supply side, coordinate economic development across regions, establish a national unified market, and create a more open industrial system. Specifically, China should increase funding in scientific research and experimental development, enhance the innovation capacity of core technologies in key fields, optimize the digital economy structure, strengthen the modern service industry, raise the labor productivity of the service industry, maximize the market’s decisive role and the government’s function in resource allocation, and build a talent system tailored to the modern industrial system.

The fifth plenary session of the 19th Central Committee of the Communist Party of China (CPC) puts forward the organic combination of the implementation of the domestic demand expansion strategy with the deepening of supply-side structural reform, and scientifically reveals the internal logic of this organic combination and the realization paths, which is of great significance to the implementation of the new development concept and the construction of a new development pattern. First, this paper provides a theoretical explanation for the organic combination of the domestic demand expansion strategy with the supply-side structural reform by analyzing why the traditional policies for expanding domestic demand are ineffective in the new development stage of China. Second, this paper elaborates the internal logic of this organic combination from two aspects. (1) The base point of the domestic demand expansion strategy must be placed under the main line of the supply-side structural reform. (2) The two should be interconnected and are mutually reinforcing, so as to form a higher level of dynamic equilibrium in which the demand leads the supply and the supply creates the demand. Third, this paper analyzes the huge space for the organic combination of the domestic demand expansion strategy with the supply-side structural reform from the perspective of releasing consumption potential and creating new demand, and on that basis proposes the realization paths of their organic combination.

The promotion of technological innovation in firms requires both the supply-push and the demand-pull. To accurately identify, assess, and further enhance the incentive effects of the policies of government procurement for innovation in China, this paper uses the text analysis method to identify government procurement for innovation from more than 640,000 pieces of government procurement contracts and conducts an empirical analysis based on the data of China’s A-share listed firms from 2015 to 2020. The study finds that government procurement for innovation significantly promotes corporate innovation by increasing the expected market returns, reducing R&D uncertainty, and easing financing constraints. Specifically, local government procurement for innovation, central government procurement for innovation, and procurement for innovation by universities and research institutes bring more significant innovation incentives for firms; and government procurement for innovation generates stronger innovation incentives for firms in strategic and emerging industries, private firms, and small- and medium-sized enterprises. Further analysis reveals that demand-side innovation procurement and supply-side innovation subsidies generally have mutually reinforcing synergies on corporate innovation. The policy synergies vary depending on the levels of corporate innovation and the orders of policy implementation. In terms of the levels of corporate innovation, the two-sided policies has mutually complementary effects on innovation-leading firms and mutually exclusive effects on innovation-lagging firms. From the perspective of the orders of policy implementation, the strategy of supply-side subsidies first, and demand-side procurement second is more effective in promoting corporate innovation than the strategies of demand-side procurement first and supply-side subsidies second, and supply-side subsidies and demand-side procurement concur. This study helps deepen the understanding of demand-side innovation support policies and provides an important reference for further improvement of China’s innovation incentive policies.

Bibliography

Book description

Under the background of China’s accelerating high-quality development, whether expanding domestic demand can promote the improvement of the core competitiveness of local enterprises is still lacking support of theoretical and empirical evidence. Using micro-data at the level of Chinese industrial enterprises, this paper empirically examines the impact mechanism and effect of domestic market demand on the enhancement of local enterprises’ core competitiveness. The research shows the following three findings. First, domestic market demand will help local enterprises to increase investment in R&D and design and brand marketing, so as to promote value-added activities to shift from tangible activities in production to intangible activities before and after production, thereby improving their own core competitiveness. Second, further deconstructing market competition factors from the perspective of ownership shows that, driven by domestic market demand, non-state-owned enterprises can enhance their core competitiveness better than state-owned enterprises. Third, China’s regional industrial distribution and development have the typical echelon characteristics, which leads to the geographical heterogeneity of the promotion effect of domestic market demand on the local enterprises to enhance their core competitiveness, showing a ladder-type declining trend from the east to the middle and then to the west. These findings provide a useful decision-making reference for better implementation of the strategy of expanding domestic demand under the background of accelerating the construction of a new development pattern.

Data is the primary factor of production in the digital economy, playing a role in promoting the deep integration of the digital economy and the real economy and smoothing the national economic cycle. After entering the circulation system of the real economy, data is rapidly integrated into production, circulation, consumption, distribution, and other links. It optimizes resource allocation, unblocks circulation channels, promotes accurate matching of supply and demand, stimulates emerging demand, and forms a virtuous circle of digital technology application, traditional physical enterprise transformation, and technological innovation. Integrated development is an important feature of the digital economy. Data promotes the integration of factors of production, products, enterprises, industries, and markets, which fosters a circular system with deep integration of the digital economy and the real economy. To promote the deep integration of the digital economy and the real economy, the government and business entities should take measures to improve the circular efficiency of the digital economy and the real economy. These measures include attaching importance to the role of data-driven development, improving data capacity, data development, and utilization in enterprises, exploring diverse circulation models of enterprise data, and creating typical application scenarios and industrial data spaces.

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Book Excerpt

Addressing the prolonged stagnation in household consumption growth in China is crucial for the successful implementation of the strategy to expand domestic demand. By constructing the upgrading index of consumption structure from 2002 to 2018, it is found that the overall upgrading trend of household consumption structure in China is accelerated after 2014. Theoretical analysis and empirical results indicate that, as household consumption structures rapidly upgrade with rising incomes in China, the primary factor limiting reasonable growth in household consumption is the insufficient effective supply resulting from a mismatch between the supply structure and the demand structure. As the adjustment of the supply structure depends on the continuous optimization of investment flow, expanding effective investment is the key driving force to improve effective supply, and it is also the existing component of expanding domestic demand. Further research shows that weakening investment convergence can significantly alleviate the insufficient effective supply caused by consumption upgrading. Enhancing the scientific anticipation of policy regulations and increasing the effectiveness of investments will be beneficial for realizing the strategy of expanding domestic demand.

Abstracts

With the rapid development and widespread application of new-generation digital technologies, the digital economy is playing an increasingly important role in driving China’s high-quality economic development. As economic growth drivers undergo transformation, studying how to promote the deep integration of the digital economy and the real economy (digital-real economy integration) holds significant strategic importance. In general, the digital-real economy integration of China has made impressive advancements, becoming an irreversible trend. Nonetheless, there persist challenges that necessitate attention, such as the imperative to strengthen underlying technology support and improve the quality of integration. By integrating specific application scenarios of digital technology with traditional enterprise theory, we can gain a comprehensive understanding of how the digital economy empowers innovation and development in traditional enterprises, thereby facilitating the exploration of practical paths for the deep digital-real economy integration. A thorough examination of the main forms and connotations of this deep integration allows us to analyze specific paths across three key dimensions: product layer, enterprise layer, and industry layer. By adopting this approach, a research framework that promotes the deep digital-real economy integration can be established.

Based on the panel data of 30 provinces (autonomous regions, municipalities) in China from 2006 to 2019, the empirical study finds that the target values of economic growth expectation can promote high-quality economic development, and there is an inverted U-shaped relationship between elastic target constraints and high-quality economic development. The elastic constraints can reduce the investment rate and improve the total factor productivity (TFP), which promotes high-quality economic development, but its mediating effect accounts for a small proportion. With the improvement of the marketization degree, the inhibiting effect of elastic constraints on high-quality economic development reduces. The analysis of the heterogeneity between the new or old normal and the levels of economic development shows that in the future, developed regions should set high target values and low elastic constraints, and underdeveloped regions should set high elastic constraints on the target values of economic growth expectation.

Since the 18th National Congress of the Communist Party of China (CPC), the quality of China’s economic development has been continuously improved. However, the year 2022 witnessed a subdued economic growth rate. The triple pressures continue to evolve, with contraction in demand as the primary contradiction facing China’s macro economy in the short term. In contrast to major economies in the world, China grapples with a low economic growth-inflation index combination, a pace of economic expansion trailing behind its potential, and a mounting unemployment rate. The impact of supply on price increases weakens, while the global industrial and supply chains are amidst continuous adjustments. Both the consumer confidence index (CCI) and the purchasing managers’ index (PMI) remain low. The expectation for the depreciation of the RMB against US dollar is weakening. In 2023, China will continue to improve the financing environment and carry out a proactive fiscal policy. Simultaneously, there is a moderation trend in the trajectory of the interest rate of the Federal Reserve System hikes. Taken together, these factors (triple pressures) are expected to mitigate the contraction in demand, thereby steering the economy toward robust growth. However, it is crucial to recognize that low economic growth in the long term may compromise the quality of economic development. The year 2023 is the first year of accelerating Chinese modernization after the 20th National Congress of the CPC. China should integrate the strategy to expand internal demand with its efforts to deepen supply-side structural reform. This can foster the coordinated growth of both economic quality and speed, making a good start for Chinese modernization.

The traditional manufacturing industry is the backbone of China’s real economy, which serves as the cornerstone for fostering high-quality economic development. This paper analyzes the operational mechanism and impact of the digital economy on the integration of traditional manufacturing industry chain and innovation chain. To achieve these goals, this paper first establishes an evaluation indicator system from three dimensions, such as the industrial base, innovation ecosystem, and economic benefits. Additionally, the paper adopts a comprehensive approach, incorporating the coupling coordination degree model, spatial econometric model, and mediating effect model. The major findings include three points. (1) The digital economy plays a pivotal role in promoting the integration of traditional manufacturing industry chain and innovation chain by addressing capital mismatches, facilitating the concentration of technology talents, and promoting financial development. The integration contributes to the optimized allocation of scientific and technological resources with innovation in the upgrading of production factors. (2) The digital economy plays a nonlinear role in promoting the integration of traditional manufacturing industry chain and innovation chain. (3) The digital economy has a positive spatial spillover effect on the integrated development of traditional manufacturing industry chain and innovation chain.

The entropy method is used to measure the high-quality economic development levels of 30 provinces (autonomous regions, municipalities) in China from 2011 to 2020, and the impacts of factor price distortion, technological innovation, and their interaction terms on high-quality economic development are analyzed based on Tobit regression. The results show that high-quality economic development of 30 provinces (autonomous regions, municipalities) in China is on the rise; factor price distortion has an inhibitory effect on high-quality economic development, while technological innovation has a promoting effect on high-quality economic development, and both of them have a lag effect; technological innovation level can help alleviate the negative impact of factor price distortion on high-quality economic development; and sub-regional research shows that the inhibitory effect of factor price distortion on high-quality economic development in the east is significantly higher than that in the central and western regions, but the positive effect of technological innovation and the interaction terms between the two on high-quality economic development is significantly lower than that in the central and western regions. Accordingly, it is proposed to optimize top-level design for the two-wheel drive for high-quality economic development, strengthen the primary role of enterprises in innovation to promote high-quality economic development, and optimize the market-oriented allocation of factors to improve the efficiency of resource allocation.

The deep integration of digital technology and the real economy is a vital engine for boosting high-quality growth of the real economy. As a result, it is necessary to investigate the effects of this integration on the real economy. This paper develops a two-sector model that incorporates the production sector and the technology research and development sector, taking into account both the factor attribute and the technical attribute of digital technology. Digital capital, general capital, skilled labor, and unskilled labor are considered as intermediate inputs in the model. Furthermore, this paper examines the effects of two integration modes, i.e., factor-based integration and technology-based integration, on the development of the real economy and the biased technical change from a theoretical perspective. Empirical tests are conducted to support the analysis. The findings indicate that both factor-based integration and technology-based integration contribute positively to the development of the real economy, although technology-based integration exhibits diminishing marginal effects. Heterogeneity analysis reveals that factor-based integration plays a more significant role in promoting the development of the real economy in regions with geographical advantages, low levels of human resources, high marketization levels, or low market segmentation. On the other hand, technology-based integration assumes a greater role in facilitating the development of the real economy in regions with geographical disadvantages, low costs on human resources, low marketization levels, or high market segmentation. Further analysis demonstrates that the integration of digital technology and the real economy leads to digital capital-biased technical change and skilled labor-biased technical change. Therefore, it is imperative for the public sector to encourage the expansion of both factor-based integration and technology-based integration in the real economy. Additionally, it is also important to develop a reasonable industry layout plan and enhance the skill level of workers to address the rising demand for relevant factors resulting from changes in the biased technical change.

Since the 1990s, China has made great progress in developing its social security system, achieving the goal of universal coverage for various segments of the population. Nevertheless, it is urgent to improve the quality of coverage, specifically in tackling the problems of inadequate participation and reduced contribution levels in the private sector. This paper examines the changes in social security coverage over the past three decades, focusing on the basic pension insurance for employees of urban enterprises and analyzing it in terms of employment structure. A regression analysis of provincial panel data from 2001 to 2019 indicates a negative correlation between the adequacy rate of social security contributions and the number of employees in private entities and self-employed individuals. Additionally, an empirical analysis using micro-level data from enterprises further confirms lower contribution levels in private enterprises. In light of the present circumstances, it is important to focus on private enterprises, flexible workers, and self-employed individuals as key target groups for expanding social security coverage. Consequently, reforming the social security system should proactively adapt to the requirements of emerging employment formats, striving to achieve comprehensive coverage and enhance the quality of participation across various groups of people.

In rural China, the trend of population aging and family hollowing is becoming increasingly severe. Traditional elderly care methods are no longer adequate to meet the growing demand for elderly care, leading to the emergence of mutual-support elderly care as a new approach to elderly care. Mutual support has gained widespread practice and has become a vital component of the rural elderly service system. However, rural mutual-support elderly care encounters development bottlenecks, including local cultural resilience, disembedding of social relationships, gaps in policies and regulations, and multiple coordination challenges. Embeddedness theory emphasizes the need for social behavior to be embedded in the network of social connections, providing a valuable theoretical framework for mutual-support elderly care. Drawing on embeddedness theory, this paper investigates the accessibility of mutual-support elderly care in rural areas by examining cognitive embeddedness, relational embeddedness, systemic embeddedness, and structural embeddedness. By addressing the development bottlenecks of mutual-support elderly care in rural China, this paper aims to propose ideas for achieving high quality development in rural mutual-support elderly care.

The funding and payout system of social insurance has a significant impact on both the welfare of individuals and the national governance. Budget performance management can optimize fiscal resource allocation and enhance the quality of public services. The inclusion of the social insurance fund budget in the national budget in 2013 as one of China’s “four budgets” underscores the public value orientation it represents and shapes. The main challenge in enhancing the social insurance fund budget system lies in balancing the insurance attribute and the welfare attribute of social insurance, using an inclusive approach to achieve actuarial balance and budget balance, address potential imbalances, forecast and prevent future risks, and alleviate operational pressures. In the future, it is vital to raise the level of budget performance management for social insurance fund through scientific and reasonable performance evaluations, promote high-quality and sustainable development of China’s social security programs, and realize shared development in the new phase of Chinese modernization.

Urban-rural integration serves as a pragmatic strategy for developing social security in China, while promoting common prosperity represents a value-driven choice. Moving from urban-rural integration toward promoting common prosperity, the social security system faces several practical challenges, including limited medical and healthcare resources, disparities in social insurance benefits, inadequacies in social assistance levels, and deficiencies in social welfare expenditures. To overcome these challenges, a gradual practical approach has been formed based on three institutional logics: the institutional integration logic for bridging the gap, the institutional adaptability logic for enhancing resilience, and the institutional enhancement logic for empowering prosperity. This approach involves a progression from management integration to institutional alignment and system integration. Promotion of common prosperity through urban-rural integration not only provides a practical perspective and realistic depiction of China’ s unique social security system but also encompasses the institutional civilization and value implications associated with the development of social security in China.

Promoting integrated development of the digital economy and the real economy is a strategic endeavor for China to bolster the burgeoning driving force of the real economy, establish a modern industrial system, achieve high-quality economic growth, and elevate international competitiveness. The essence of integrated development of the digital economy and the real economy lies in the restructuring and upgrading of input factors and production and operational models within traditional enterprises, enabling traditional enterprises to undergo a digital intelligence transformation and upgrade. This transformation is achieved by harnessing data factors, digital technologies, and digitalized intelligent products provided by the digital economy sector. In practice, the integration of the digital economy and the real economy takes place by incorporating digital technologies into the production and operational nodes of traditional enterprises, leading to the implementation of diverse integration modes, each with its own unique level of efficiency. At present, it is imperative for China to establish a division of labor and cooperation mechanism characterized by an efficient market and a proactive government to further promote integrated development of the digital economy and the real economy.

In January 2022, China introduced a national pooling system for pension insurance fund, with the objective of inter-regional fund surplus and deficit adjustment. With the ongoing trend of population aging, can the national pooling and adjustment system operate sustainably? What level of fiscal obligations does it entail? This is related to the long-term stability of pension insurance fund and the whole social security system. This paper employs econometric and actuarial models to assess the sustainability of the national pooling and adjustment system under five scenarios: (1) not introducing any policy interventions; (2) implementing parameter reforms such as expanding pension insurance coverage, progressively extending retirement age, and enhancing collection rates; (3) transferring state-owned capital from central state-owned enterprises to strengthen the social security fund; (4) transitioning the national pooling and adjustment system from turning over current surplus to accumulated surplus; and (5) implementing all parameter reforms, transferring state-owned capital, and turning over accumulated surpluses. The results suggest that a coordinated implementation of reform measures like pension insurance parameter adjustments, reallocation of state-owned capital to enhance social security funds, and leveraging the national pooling and adjustment system for turning over accumulated surplus can ensure the sustainability of the system and significantly alleviate fiscal pressures.