China’s Industrial Modernization:Development Rationale, Current Status,and Policy Directions

Research Group of IIE-CASS*

Institute of Industrial Economics, the Chinese Academy of Social Sciences (IIE-CASS), Beijing, China

Abstract: Economies that have effectively escaped the “middle-income trap”demonstrate common traits in their industrial restructuring as they progressed to highincomestatus. These include a relatively stable share of an economy’s manufacturing sector,a reasonable economic structure, enhanced industrial capabilities, and growth driven byinnovation. However, late-moving countries face a number of hurdles as they strive to crossthis threshold. China’s development advantages include, among other things, a completeindustrial system, a more balanced industrial structure, growing indigenous innovationcapabilities, continual expansion and upgrading of domestic demand, and a greater degreeof openness. These capabilities have provided continuous momentum for industrial growth,allowing China to capitalize on the next wave of technological and industrial revolutionswhile also promoting long-term, steady industrial development. During its modernizationefforts, China has seen substantial changes in the external environment surrounding itsindustrial development. We must not only recognize the increasing complexity, intensity,and uncertainty of these changes, but also take proactive steps to solve diverse issues andcapitalize on opportunities arising from global digital and green transitions. Equal focusshould be placed on strengthening reforms and promoting high-level openness, improvingpolicy coordination and consistency, and pursuing an innovation-driven strategy. This willspeed the development of a modern industrial system and encourage the formation of new,high-quality productive forces.

Keywords: Industrial development, industrial structure, middle-income trap, high-income

JEL Classification Codes: O14

DOI: 10.19602/j.chinaeconomist.2024.09.01