Deeper reform can help meet new challenges

Thanks to China's transformation from high-speed economic growth to high quality development, its economy has reached a period of significant strategic opportunity. By 2035, China is expected to achieve socialist modernization with its per capita GDP reaching 35,000 international dollars in terms of purchasing power parity (PPP). While the United States reached that level in 1988, Germany, France, the United Kingdom and Japan did so in 1998, 2001, 2003 and 2004, respectively.

But to realize that goal, China has to solve several significant long-term problems. First, it has to maintain high total factor productivity (TFP), which at present is only 43 percent that of the US, whereas when the main developed countries achieved economic modernization, their TFP was about 78 percent that of the US. To increase its TFP in the following years, therefore, China should expedite systemic reform in order to let the market play a leading role in factor distribution and give full play to factor efficiency.

Second, to achieve socialist modernization by 2035, the proportion of the primary, secondary and tertiary industries in GDP should be roughly 3 percent, 32 percent and 65 percent, just like it was for the developed countries when their per capita GDP reached 35,000 international dollars in PPP terms. Which means China should focus on developing the service industry, especially the high-end service industry.