Key meeting says shift in focus from real to virtual economy to be avoided

China's latest emphasis on speeding up the construction of a modern industrial system backed by the real economy will help the country gain a competitive edge in strategically important fields and lay a solid foundation for long-term economic growth amid headwinds and external uncertainties, experts and business executives said.

Recent policy developments have underscored the country's firm determination to focus on developing the real economy — especially high-end manufacturing underpinned by cutting-edge digital technologies — safeguarding the security and stability of industrial and supply chains, and achieving greater self-reliance and strength in science and technology, they said.

Their comments came as the recent meeting of the Central Commission for Financial and Economic Affairs stressed that in order to build a modern industrial system that is holistic, advanced and secure, China should seize opportunities presented by the new scientific and technological revolution, such as artificial intelligence.

A shift of focus from the real to the virtual economy must be avoided, the meeting noted, highlighting efforts to reinforce the country's strength in having a complete industrial system with strong support capacity, transform and upgrade traditional industries, and make industrial security a top priority.

Li Xianjun, an associate researcher with the Institute of Industrial Economics at the Chinese Academy of Social Sciences, said China's efforts to put a development focus on the real economy and build up its strength in the modern industrial system will help make China's economy more resilient, strengthen the capacity to buffer against external risks and shocks, and build the country into a manufacturing powerhouse.

"The manufacturing industry, as the main body of China's real economy, is playing an increasingly crucial role in motivating enterprises to bolster technological innovation, facilitating the development of other strategic emerging sectors, and enhancing the country's core competitiveness on the global stage," Li said.

China has maintained its position as the world's largest manufacturing hub for 13 straight years, accounting for nearly 30 percent of global manufacturing output in 2022, according to the Ministry of Industry and Information Technology.

The meeting sends a clear signal that China attaches importance to rapidly growing AI technology, which is accelerating its deep integration into various industries, and will play a bigger role in liberating productive forces and fostering new growth drivers, said Pan Helin, co-director of the Digital Economy and Financial Innovation Research Center at Zhejiang University's International Business School.

Faced with increasingly fierce international competition, the construction of a modern industrial system is of great significance to boost intelligent, green and integrated development of industries, improve the resilience and security of industrial and supply chains, and inject strong impetus into China's economic recovery, Pan said.

He called for heightened efforts to strengthen the protection of intellectual property rights to spur technological innovation, and optimize the business environment to attract capital and technology inflows.

Li Dongsheng, founder and chairman of Chinese consumer electronics company TCL Technology Group Corp, said China's resolve to develop its real economy and modernize its industrial system has set the direction for the country's high-tech manufacturing segment, which has become an important driver of China's high-quality economic development.

"China's manufacturers should transition from exporting products to exporting industrial capacities, ramp up localized operations abroad and avoid trade barriers to enhance their global competitiveness," Li said.

Chen Duan, director of the Digital Economy Integration Innovation Development Center at the Central University of Finance and Economics, said more efforts are needed to beef up investment in frontier technologies and forward-looking fields, and achieve breakthroughs in core technologies in key areas through independent innovation amid a rising tide of protectionism in some countries.

Meanwhile, Chen highlighted the significance of expanding international exchanges and cooperation in science and technology, and taking an active part in formulating global rules and standards for core technologies.

AI is expected to become an important driving force for improving total factor productivity and promoting China's high-quality economic development on the premise of preventing potential risks brought by new-generation technology, said Li Qilin, chief economist at Shanghai-listed Hongta Securities.

Zhou Hongyi, founder of cybersecurity company 360 Security Group, said AI-powered large language models will spearhead a new round of technological and industrial revolution and the company will leverage digital technologies to promote the digital transformation of micro, small and medium-sized enterprises.