Technological innovation in manufacturing sector and advance of AI look set to boost productivity
A worker at the Linzhou Heavy Machinery factory in the Hongqi Canal Economic and Technological Development Zone in Linzhou, Henan province, on March 19. Photo: Xinhua
China’s economy is set to bottom out, with new growth prospects emerging, but data released so far this year still points to deflationary risks, scholars from Peking University said, urging a faster pace of policy implementation to support the country’s economic recovery.
Liu Qiao, dean of the Guanghua School of Management at Peking University, told a seminar in Beijing on Wednesday that last year was likely to have been a tougher one for the Chinese economy than any year in the next decade.
Despite ongoing uncertainties, particularly trade tensions with the United States, Liu said China is on a path to recovery.
He said the embrace of technological innovation by the country’s sizeable manufacturing sector could play a pivotal role in boosting total factor productivity.
Additionally, the success of the home-grown DeepSeek artificial intelligence model suggested there were significant opportunities for enhancing productivity in different industries.
New sectors are emerging as significant driving forces, said Yan Se, an associate professor at Guanghua, with auto industry revenue surpassing property sales by over 1 trillion yuan (US$138.29 billion) last year.
Those emerging sectors will play a key role in supporting China’s economic expansion this year, with the real estate sector – a traditional pillar of the economy – set to stabilise after a significant downturn in recent years, Yan said.
Liu highlighted the significant policy shifts announced by the government, including a firm commitment to a proactive fiscal policy and a moderately loose monetary policy.
It had also, for the first time, made boosting consumption a key target, he said, with new policy tools introduced, including improved pensions for rural residents and childcare subsidies.
Liu said that level of policy clarity and commitment from the government had “instilled confidence” that this year’s economic growth target of around 5 per cent could be achieved.
But Yan, citing the falling consumer price and producer price indices, cautioned that there was still a huge risk of deflation.
The consumer price index fell by 0.7 per cent in February compared to the previous year, while the producer price index dropped by 2.2 per cent.
Yan said that gross domestic product data from the past four years showed that growth is typically slower in the second quarter of the year than the first, which benefits from the positive impact of policies announced at the previous December’s central economic work conference.
Real estate inventory was shrinking but the area of new construction continued to decline, which reflected weak investment, Yan said, expressing concerns about whether a strong recovery could be achieved in the short term.
He also noted that the implementation of both fiscal and monetary policies has been lagging, citing the slow issuance of special-purpose bonds and still-high real interest rates as examples.
China’s central bank has pledged to cut interest rates and the reserve requirement ratio for commercial banks at an “appropriate time” to bolster the economy amid the trade war with the US, but no specific reductions have yet been announced.
Source:
South China Morning Post
Written by:
Carol Yang
