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Promote High-Quality Development with the Focus Laid on Raising Total Factor Productivity (No.107, 2019)

Aug 20,2019

By Chen Changsheng & Yang Guangpu, Research Team on “Objectives and Strategic Focus of High-Quality Development”, DRC

Research Report, No.107, 2019 (Total 5607) 2019-7-5

Abstract: Since reform and opening up, the rapid development of total factor productivity (TFP) has become the main driving force of China’s economic growth. However, due to multiple factors, after the international financial crisis in 2008, China’s TFP growth rate fell into a significant decline and its contribution to economic growth also decreased. To promote high-quality development, raising TFP is an inevitable option. First of all, we need to flesh out the incentive mechanism for innovation, strengthen the protection of intellectual property rights and bolster the development of cutting-edge technologies. Second, we need to improve macro policies, maintain the policy consistency, adopt countercyclical policies, narrow the range of economic fluctuations to ensure the steady economic growth. Third, we need to further strengthen the basic role of the competition policy, lower the threshold for market access and exit, deepen price reform, promote the flow of factors, sort out the pricing mechanism and boost the efficiency of resource allocation. Fourth, we need to further break the market segmentation and reduce the efficiency difference between industries and regions. Fifth, we need to advance opening-up and accelerate international technology diffusion so as to narrow the productivity gap with countries boasting advanced technologies.

Key words: high-quality development, total factor productivity, structural reform