China’s Third Plenum, a pivotal five-yearly gathering known for heralding significant economic reforms, wrapped up on July 18 in Beijing. Analysts have been eagerly anticipating the leadership’s strategies for economic growth, broader development, and climate action.
The Central Committee of the Chinese Communist Party’s official readout urges policymakers to pursue a spectrum of reforms. These range from promoting “high-quality economic development” and “supporting all-around innovation” to “deepening reform in ecological conservation systems.”
Significantly, the document calls for concerted efforts to “cut carbon emissions” and “actively respond to climate change.” This marks the first time carbon emissions have been explicitly mentioned in a plenum document.
A crucial step toward these goals is “improving institutional mechanisms for developing new quality productive forces” (NQPF). This term, which debuted in official rhetoric in September last year, has since become prominent in Chinese state media and high-level policy documents related to industrial development and low-carbon growth.
Chinese President Xi Jinping emphasizes that a vital aspect of NQPF is “green development,” describing it as the “base color of high-quality development.” In January 2024, he asserted that “new quality productivity itself is green productivity,” underscoring the development of low-carbon technologies like electric vehicles (EVs) and the broader “green transformation” of the economy.
Despite its promise, there is considerable debate about whether the NQPF concept—also translatable as “new productive forces” or “new quality productivity”—will lead to tangible policy outcomes and bolster industries crucial to China’s energy transition.
Understanding ‘New Quality Productive Forces’
The term “new quality productive forces” was first introduced by Xi Jinping during a 2023 visit to Heilongjiang province, located in China’s industrial northeast. In January 2024, he elaborated on the concept, describing it as innovation-led development that diverges from traditional economic growth models and pathways. This new approach emphasizes high levels of technology, efficiency, and quality, leading to an in-depth transformation and upgrading of industry.
According to the University of Cambridge-affiliated think tank Cambridge Industrial Innovation Policy, this has resulted in a pervasive focus on innovation within discussions about NQPF. The goal is to trigger technological and institutional changes that will enhance China’s advanced manufacturing capabilities.
However, the emphasis on innovation and advanced technology is just one aspect. The Council on Geostrategy suggests that NQPF also requires deeper reforms of China’s economic model. Key areas for reform include the market-based economy, state-owned enterprises (SOEs), and the fiscal, household registration, and healthcare systems.
Driven by both the government’s “visible hand” and the market’s “invisible hand,” these reforms are seen as crucial for China’s sustained prosperity, according to the Xinhua Institute, a think tank linked to state news agency Xinhua. The institute ties NQPF to Marxist theory, asserting that it aligns with the Marxist goal of improving the means of production, a core driver of production, reform, and human development.
Most official explanations of NQPF are broad and unspecific, but low-carbon development is one of the few clearly stated priorities.
Implications for Low-Carbon Development
NQPF is expected to provide substantial support for green development. A commentary in the Communist Party-affiliated People’s Daily, reposted on the National Energy Administration’s website, asserts that protecting and improving the ecological environment is essential for enhancing productivity.
Some analyses go further. Professor Zhang Yunfei from the Marxism Studies Department at Renmin University in Beijing, and a researcher at its National Institute of Development and Strategy, told China Environment News that NQPF represents a uniquely Chinese development model. Unlike the “traditional productive forces in Western societies” or “black productivity,” characterized by high resource consumption and pollution, NQPF signifies “green productivity,” which will help China shift from following to leading globalization, promoting healthy and green development.
Zhang explains that “green productivity” is sustainable productivity that focuses on ecologicalization and the development of ecological productive forces. These forces are fundamentally rooted in nature and driven by sustainable resources like information, a new generation of workers who understand ecological civilization, and an enhanced level of sustainable development based on green science and technology.
In essence, NQPF aims to create a development model that is not only innovative and efficient but also sustainable and ecologically responsible, positioning China as a leader in global green development.
Importance of NQPF
The concept of NQPF is seen as a holistic approach designed to address complex, interrelated challenges faced by China and to create a more resilient and dynamic economy that will bring long-term prosperity, according to Dr. Muyi Yang, a senior electricity policy analyst for China at the think tank Ember.
Arthur Kroeber, founding partner and head of research at Gavekal Dragonomics, notes that NQPF is “the latest iteration of a long-running trend towards industrial policy, technology, and intensive growth.” He describes it as “essentially a new bottle for old wine,” emphasizing a national mission to build China into a technological superpower.
Bill Bishop, author of the Sinocism newsletter, told Bloomberg that Xi Jinping’s endorsement of NQPF sends a powerful signal to stakeholders across the system, highlighting its significance.
Addressing Leadership Concerns
NQPF addresses specific anxieties facing China’s leadership. Strengthening the country’s ability to innovate not only supports economic growth but also provides a greater sense of security. For instance, Xi Jinping has highlighted concerns about China’s reliance on others for core technologies and the pressure to transition to green and low-carbon production modes.
Professor Yao Yang from Peking University emphasized that the overarching aim of NQPF is to lay a solid foundation for the future of the Chinese economy, indicating its importance for long-term stability and growth.
Kroeber also draws historical parallels between China’s current fears of technological isolation and the Sino-Soviet split, which left China to develop its economy independently. This historical context influences current policy decisions and emphasizes self-reliance.
Implications for Low-Carbon Technology Industries
A primary aim of NQPF is to expand “strategic emerging industries” and “nurture future industries,” according to Deng Zhou, an associate research fellow at the Institute of Industrial Economics of the Chinese Academy of Social Sciences. Strategic industries include new energy, new energy vehicles, and energy conservation and environmental protection.
Recent analysis found that clean energy sectors contributed 11.4 trillion yuan (US$1.6 trillion) to China’s economy in 2023. Future industries, according to a January policy document, include nuclear energy, nuclear fusion, hydrogen, biomass, crystalline silicon solar cells, thin-film solar cells, and new energy storage such as batteries.
In his January speech, Xi stated that successful deployment of NQPF requires accelerating green science and technology innovation, promoting the application of advanced green technology, strengthening the green manufacturing industry, growing the green energy industry, and developing green and low-carbon industrial and supply chains.
State Coordination and Industry Support
Much of NQPF’s development will be driven by state-coordinated efforts. China Daily reports that efforts to cultivate NQPF will encourage centrally administered state-owned enterprises (SOEs) to deploy more resources toward developing strategic emerging industries.
Kroeber believes this will lead to the mobilization of national resources through a “new national system,” aiming to create better coordination mechanisms between central and local governments. This approach is inspired by the success of China’s electric vehicle (EV) industry, which benefited from significant state support and the emergence of innovative and competitive businesses.
Several commentaries highlight EVs as a key example of NQPF in practice. Wang Yiming, vice chairman of the China Center for International Economic Exchanges, noted that the rapid development of China’s EVs exemplifies NQPF, formed by deep industrial transformation and upgrading.
China hopes to replicate its achievements in the EV sector across other industries by using innovation to foster leading expertise. For example, China’s experience in manufacturing LCD televisions contributed to its success in developing solar technologies, which require similar manufacturing processes.
Concerns Over NQPF
China’s use of state resources to support strategically important industries has raised concerns about overcapacity. Both the US and the EU have imposed tariffs on China-made EV imports. Domestically, there are also concerns about the potential for overcapacity.
Han Wenxiu, a top economic policy planner, cautioned against “campaign-style” implementation of NQPF policies, warning against neglecting traditional industries and creating bubbles.
Some analysts link NQPF to broader economic growth challenges and difficulties in implementing radical economic reforms, leading to a lack of action on consumption. Michael Pettis, a senior fellow at the Carnegie Endowment, emphasizes the need for increased consumption to balance production.
Given current tensions with the US, Kroeber notes that China cannot rely on imports of technology and must develop its own alternatives. He acknowledges concerns about overcapacity but finds them overly politicized, suggesting any spikes in capacity may be unintentional.
Translating NQPF into Climate Policy
At a June press conference, the Ministry of Ecology and Environment (MEE) announced a ‘1+N’ policy on NQPF to promote its accelerated development and enhance the “green-ness” of high-quality development. This framework, established in Chinese environmental policymaking, sets overarching objectives and guides numerous action plans and policy measures.
The MEE stated that NQPF could help significantly reduce pollutants and carbon emissions, improving the ecological environment. In July, the MEE released regulations to update the management of ecological environment zoning control, potentially leveraging NQPF to push through reforms.
The Ministry of Science and Technology (MOST) announced the establishment of a center for promoting NQPF, which may improve MOST’s autonomy in policy planning for science and technology innovation.
Kroeber notes that every government document now references NQPF, indicating bureaucratic alignment with Beijing’s goals. He adds that power market reform is a key area where NQPF’s effectiveness will be tested, given the importance of abundant, low-cost electricity for technological development.
Yang emphasizes that NQPF is far from being purely conceptual, anticipating more actions across various sectors to translate it into concrete initiatives and programs.