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An innovative course for China
The Fifth Plenum of the Communist Party concluded last week with several major decisions. The world's media was hooked by the change to the one-child policy, but there was also another important statement of intent.
“Innovation will play a critical role in growth strategy over the next five years,” notes Zhiwei Zhang, Deutsche Bank Chief Economist for China.
“The [Plenum] press release specifically mentioned "internet +" and "national big data strategy" which we believe will get government support.”
Zhang points out that President Xi also emphasized the role of innovation in a government meeting on August 18, 2014.
Xi argued that innovation could be promoted by: identifying the right areas to spend resources; strengthening incentives to attract talent; developing institutions to promote innovation; and cementing international collaboration.
“The focus on innovation likely reflects that the leaders recognize investment driven growth model is not sustainable, hence the search for productivity growth is critical for the next five years,” says Zhang.