SHANGHAI, Sept. 30 (Xinhua Silk Road) -- China's shift toward a consumption-led growth model supported by innovation could strengthen its medium-term economic prospects while generating significant spillovers for the global economy, an International Monetary Fund (IMF) official has said.
-- Ensuring innovation promotes sustainable growth
China has made promoting Research & Development (R&D), advanced manufacturing, and innovation top policy priorities. China now spends more on R&D than any country except the United States and files more patents than any other country, Krishna Srinivasan, director of the IMF's Asia and Pacific Department, said in a recent interview with Xinhua Finance.
The authorities have increasingly emphasized innovation, technological self-reliance and "new quality productive forces," which are highlighted in the country's 15th Five-Year Plan (2026-2030) for economic and social development. "China has also achieved high-profile advances in technology in some sectors, such as artificial intelligence (AI) and advanced manufacturing. The complexity of China's exports has been rising," Srinivasan said.
Srinivasan explained that studies have found a positive effect of R&D and patents on individual firms' productivity in China. At the same time, the impact of innovation on productivity depends on the incentives and capabilities for firms to commercialize and adopt new technologies. Innovation is more vibrant in ecosystems characterized by competition and firm turnover, while business dynamism allows successful innovators and adopters, often young firms, to grow rapidly.
While precise numbers for AI's impact specifically on China are still being estimated, IMF research suggests that AI could raise growth in emerging markets by 0.2 to 0.8 percentage points, with the gains driven by productivity improvements, Srinivasan said.
Srinivasan added that, while these prospective gains from AI are important, China faces the same challenges as the rest of the world, where such gains are still uncertain and are at risk of becoming unevenly distributed across workers, firms, and regions. Therefore, it will be key to focus on policies that foster innovation and AI diffusion, while strengthening skills and labor-market adjustment mechanisms, social protection, and AI governance frameworks.
-- Strengthening consumption's role in driving growth
China's large domestic market offers considerable scope to strengthen domestic demand as the economy transitions toward a new growth model, Srinivasan said.
"Given China's large domestic market, there is a clear avenue to rely on domestic demand rather than external factors," he said.
Srinivasan said Chinese policymakers were increasingly aware of the need for such a shift, pointing to the 15th Five-Year Plan as evidence of an intention to place greater emphasis on consumption-led demand.
Achieving this transition will require a combination of policy measures, he said, including stronger social safety nets, reforms to fiscal and monetary frameworks, and changes to incentives that have historically placed a strong emphasis on growth targets.
-- China's growth has global implications
China's economic performance matters well beyond its borders because of the country's size and deep integration into regional and global supply chains.
Asia as a whole accounts for about two-thirds of global economic growth, while China contributes around 30 percent, Srinivasan said.
The IMF estimates that a 1 percentage point increase in China's growth is associated with an approximately 0.3 percentage point increase in growth elsewhere in Asia over the medium term, with the effects particularly pronounced in economies that have strong trade links with China.
Countries such as Vietnam and South Korea, which are deeply integrated into regional production networks, stand to benefit significantly when China's economy performs well, he said.
"Because of this deep integration, when China performs well, other countries in the region may also benefit," Srinivasan said, either through stronger Chinese demand or supply-chain linkages.
-- Deeper regional integration to unlock further gains
Srinivasan also highlighted the potential for deeper regional economic integration to generate additional growth opportunities.
While around 70 percent of Asia's trade in intermediate goods takes place within the region, only about 30 percent of final-product demand is sourced from within Asia, according to IMF research.
Reducing non-tariff barriers in the region could therefore unlock significant additional gains. The IMF estimates that lowering such barriers in a legally enforceable manner and in line with World Trade Organization principles could raise Asia's real GDP by 1.8 percent over the medium to long term, Srinivasan said.
Economies of the Association of Southeast Asian Nations (ASEAN) could benefit particularly strongly because of their openness and access to lower-cost inputs and larger final-goods markets, he added.
Despite significant trade disruptions and fragmentation in recent years, global trade has proved remarkably resilient, with trade flows adapting rather than simply disappearing, Srinivasan noted.
Regional platforms such as the Asia-Pacific Economic Cooperation (APEC) forum could play an important role in easing trade tensions and strengthening multilateral cooperation, he said.
-- Shanghai Center to deepen IMF's Asian research
Srinivasan also highlighted the growing role of the IMF Shanghai Center in the IMF's research on emerging markets and middle-income economies.
The Shanghai Center is the IMF's only research center outside Washington. Rather than focusing exclusively on China, it is designed to examine economic issues relevant to emerging and middle-income economies more broadly.
Since opening last December, the center has established a Research Steering Committee and expanded its team of economists, research analysts and visiting scholars.
Srinivasan described the center as a two-way platform through which emerging markets and middle-income economies can bring their own perspectives to economic research.
He also highlighted the China-IMF Capacity Development Center (CICDC), co-hosted at the Shanghai Center, which can support the implementation of research findings through capacity development and peer-to-peer learning.
"With strong collaboration and a clear research agenda, I am very optimistic about the center's contributions over the coming years," Srinivasan said. (Contributed by Ji Lei and Gao Pan)
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