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Movers and Shapers
Innovation, technology and domestic consumption to keep Chinese economy buoyant
By Ji Jing  ·  2019-07-05  ·   Source: NO.28 JULY 11, 2019

Premier Li Keqiang meets with Summer Davos participants in Dalian, northeast China's Liaoning Province, on July 2 (XINHUA)

In an exhibition area of the World Economic Forum's (WEF) Annual Meeting of the New Champions in China's northeastern coastal city of Dalian, a robot was performing a surgical operation on a rose. The volunteers in the booth invited visitors to have a go at running the machine, which was developed by U.S. company Intuitive Surgical and has been used in 6 million successful surgeries worldwide. Over 110,000 of these were done in China, which has around 80 such robots in use in hospitals.

"The robot is precise and alleviates the workload of surgeons," a volunteer at the Hospital of the Future booth said.

Not only foreign companies but domestic ones are also developing and applying new technologies and devices. Dorabot, a Chinese robotics company founded in 2014, was among the 56 emerging tech firms from around the world selected by the WEF to take part in a two-year program as technology pioneers. Dorabot develops robots that sort, load and unload packages in warehouses to create a seamless delivery and logistics service.

Cutting-edge technologies like artificial intelligence (AI) and 5G, which define the fourth industrial revolution, were the buzzwords at this year's WEF meeting in China, also known as the Summer Davos Forum, held on July 1-3 on the theme Leadership 4.0: Succeeding in a New Era of Globalization. Such technologies are also crucial for China's growth to transform from being export and investment-driven to one driven by innovation and consumption.

A surgical robot operates on a rose at the exhibition area of the Summer Davos on July 1 (XINHUA)

Defending globalization

In spite of the anti-globalization sentiment in the world, Premier Li Keqiang reiterated China's commitment to globalization and free trade at the opening ceremony of the Summer Davos.

Li said all countries have benefited from economic globalization. "The new round of industrial revolution set off amid economic globalization has not only brought closer links in the global industrial chain, innovation chain and value chain but also effectively promoted inclusive growth," he added.

He also announced measures to further open up the Chinese economy. China will be more open, transparent and predictable for foreign investment, and its business environment will improve, he said.

Foreign investors will be encouraged in advanced manufacturing industries such as electronic information, equipment manufacturing, medicine and new materials, and in central and western regions. Li said there will be favorable policies for equipment imported for self-use, corporate income tax and land supply.

The government will remove caps on foreign ownership of brokerages, futures dealers and life insurers by 2020, a year ahead of the previous plan, to further open up the financial and other modern service industries. Foreign investors will also face fewer restrictions in accessing value-added telecommunications and transportation.

Li said supporting regulations are being drafted to implement the Foreign Investment Law and will come into effect on January 1 next year together with the law. Intellectual property (IP) rights will be better protected with tougher penalties for infringements and crackdowns on counterfeiting.

"Premier Li sent very positive messages," Albert Ng, Chairman of Ernst & Young China, told Beijing Review. "One key message is that China will continue to open up to the rest of the world and continue to support globalization despite all these anti-globalization movements in the world. China will encourage more foreign investment and an even better environment for foreign investment."

With the Foreign Investment Law in place, Ng said China is looking at more regulations and detailed rules to implement the law. Its decision to remove restrictions on foreign investors' shares in financial institutions ahead of schedule "means China will not only open up more but also create a better environment for foreign investment quicker," he added. "Li also mentioned that China will enhance protection of IP rights to protect foreign investment."

Bernardino Regazzoni, Swiss Ambassador to China, said the important points in Li's speech, in his view, were "opening up the economy and equal treatment for private Chinese companies, state-owned companies and foreign companies."

Panelists take part in a discussion on China's energy industry at the Summer Davos on July 3 (XINHUA)

Technology-driven future

The reiteration of China's commitment to globalization and free trade is of special significance, especially in the context of the China-U.S. trade friction. Although a truce was reached during the Group of 20 Summit in Japan, a comprehensive agreement has yet to be signed between the two countries.

However, the business magnates and scholars who attended the WEF meeting remained optimistic about the Chinese economy, given its potential to transform into innovation and consumption-driven growth. During the January-May period, hi-tech manufacturing investment increased by 10.2 percent year on year, exceeding the growth rate of all manufacturing investment by 7.5 percentage points, data from the National Bureau of Statistics (NBS) showed.

Zhu Wei, Senior Managing Director and Chairman of Greater China Accenture, a professional services company, said, "Even the most conservative CEOs in China are talking about AI and digital transformation…People understand that the trade tension is going to continue and won't be solved overnight. Chinese companies, even small and medium-sized enterprises, are trying harder to build up their ecosystem, improve their digital supply chain, and strengthen their capabilities."

Jin Keyu, a professor of economics at the London School of Economics and Political Science, pointed out one positive result of the trade friction: "The U.S. is pushing China to strive for self-sufficiency and greater technological independence and that's an unintended consequence of the trade war which doesn't serve U.S. purposes."

Ning Gaoning, Chairman of the Sinochem Group, was confident about the Chinese economy. He said the China-U.S. trade friction will not have a major impact on the Chinese economy as China's exports to the U.S. account for only a part of all its exports.

"All negative predictions about the Chinese economy over the past 30 years have proved wrong. China has a very strong growth momentum, as indicated by the sound employment situation. Also, consumption has become the largest contributor to GDP growth," Ning said.

The fact that the Chinese Government has taken no stimulus measures was also a proof of the health of the economy, he added. As the Chinese economy transitions, Chinese companies are also facing the task of transformation and upgrading and will undergo major changes in their business models. They will pay more attention to technology and long-term planning.

"China will become a research and development-driven country in 10 years as Chinese companies' competitiveness improves," Ning said.

Zhu Min, Chairman of the National Institute of Financial Research at Tsinghua University, agreed that the competitiveness of enterprises, especially that of the manufacturing industry, is important for propelling high-quality growth.

He said China has the largest manufacturing industry worldwide, with the GDP created by this industry tantamount to that produced by its U.S., Japanese and German counterparts added together. China also has the most complete manufacturing industrial chain in the world, which constitutes its core competitiveness.

"However, how to improve the quality of the industry to move it up the global value chain is the major task and challenge faced by China," Zhu said. "Fortunately, AI has fundamentally changed the Chinese manufacturing industry's path of upgrading, leading it to an intelligent and autonomous process. China should seize the opportunity brought by AI to upgrade its manufacturing industry."

Jing Ulrich, Vice Chair of Global Banking and Asia-Pacific at JPMorgan Chase & Co., said technology and innovation will become very important drivers of growth, citing the development of new technologies such as 5G. "5G doesn't just mean faster speed. What it means is that it will transform the way we live and work. Everything in your home, from your microwave oven to your cars, will be connected."

In addition to technological innovation, consumption is playing an important role in shoring up growth. Last year, consumption contributed 76.2 percent to China's GDP growth.

"The makeup of China's GDP growth is more important than its size. Fixed assets formations such as real estate are giving way to consumption and services led by a population of millennials. Asia has more millennials than the U.S. and Europe combined. What's also different is that we have the first millennials that have more disposable income than their parents," Paul Yang, CEO for Greater China at investment firm Kohlberg Kravis Roberts & Co., said.

"Local consumption is strong. The efficiency of the service sector, particularly health and education, will continue to improve with the further opening up of China. 5G will have a significant amount of investment and will help a majority of industries improve their efficiency. If we add all these factors together, I feel that the growth of China's GDP will still remain at a relatively high level," Jeffrey Lu Minfang, CEO of the Mengniu Group, a leading dairy product manufacturer, said.

2019 Summer Davos Forum at a Glance

The 13th Annual Meeting of the New Champions, a flagship brand of the World Economic Forum based in the resort town of Davos, Switzerland, was held in Dalian in Liaoning Province, northeast China, from July 1 to 3. Its theme was Leadership 4.0: Succeeding in a New Era of Globalization.

The event, also known as the Summer Davos Forum, aims to bring together political and corporate leaders from around the world for dialogue. It is a platform for both emerging and long-established enterprises and Eastern and Western countries to interact and cooperate.

The First Summer Davos was held in Dalian in September 2007. Since then, Dalian and Tianjin take turns to hold the annual event.

The forum has opened a new window for Dalian to exchange ideas and cooperate with internationally renowned companies. Since 2007, the world's top enterprises have established presence in the city at a much faster pace than before, with a new Fortune 500 company entering the city every 45 days on average.

(Compiled by Beijing Review)

(Reporting from Dalian, Liaoning Province)

Copyedited by Sudeshna Sarkar

Comments to jijing@bjreview.com

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