The promotion of market competition is also central to the diffusion of technologies. The report argues that China still has considerable scope to benefit from further opening of its economy to foreign investment and competition, including by speeding up development of the regulations and administrative review and licensing procedures needed to implement the country’s new Foreign Investment Law. In addition, the report points to the critical role of human capital, including managerial skills, in facilitating the diffusion of technologies. In this regard, a major priority is to address the remaining regional disparities in educational attainment. Curriculum reforms, pedagogical advancement to promote creativity and the cognitive skills of students and the establishment of a lifelong learning system would ensure that China’s workforce can adapt to the changing skill needs of its economy.

China has rapidly improved its innovation capabilities in recent years. Nonetheless, to foster further discovery of new products and processes, the report proposes a recalibration of China’s national innovation system. The objective of such recalibration should be to make it bottom-up, market-oriented and inclusive and to develop innovation support programs that are more demand-based. It also suggests reorienting a greater share of public R&D support to basic research, strengthening of intellectual property rights and improving the quality of patents. Robust market competition would incentivize enterprises to continuously innovate and upgrade.

The report^[2] argues that unlocking the new drivers of growth will require continuous reforms. To help boost innovation and productivity, the role of the state needs to evolve and focus on providing stable market expectations, a clear and fair business environment, strengthening the regulatory system and the rule of law, and reforming the management of civil service performance to further support the market system.