In a recent press conference, a suite of incremental policy measures was unveiled, significantly bolstering market confidence and invigorating economic activity in ChinaThis strategic move aimed to accumulate more positive factors for the economy to ascend, yet the lingering issue of inadequate effective demand remains a primary challenge hindering the transformation and upgrading of China’s economyIt has become increasingly urgent to implement a more forceful and precise policy mix that can amplify effective investment and overcome the current deficit in effective demand.

Effective investment is the critical driving force behind the promotion of economic transformation and upgradingIt possesses the dual capabilities of stimulating both supply and demand, thereby creating employment opportunities and increasing wage levels while concurrently optimizing the supply structure to foster a balance between macroeconomic supply and demand

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The complex task of transitioning from old to new growth drivers in China's economy necessitates not only fostering innovative business models through technological advancements but also emphasizes the importance of enhancing new infrastructure, upgrading equipment, and optimizing production lines to elevate the quality of traditional industriesBy optimizing resource allocation, effective investment can catalyze the emergence of new technological applications, create new product formats, generate new consumption scenarios, and enhance the capacity of product and service supply, thus paving the way for new medium to long-term consumption demandsIncreasing the scale of effective investments in specific areas can also send clear and logically consistent incremental signals that mitigate policy uncertainties and guide reasonable expectationsAs previous macroeconomic policies are implemented, the positive influence of effective investment on economic transformation and upgrading becomes increasingly evident, highlighting China’s resolute policy direction aimed at steadily expanding effective investments to facilitate economic transformation.

To shift from investment-driven to innovation-driven economic growth, it is essential to adhere to a concept of effective investment that fosters high-quality development, thereby maximizing effective investment's pivotal role in driving economic transformation and upgrading.

Government investment must take the lead, serving the pursuit of high-quality development

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During this stage, economic growth should place greater emphasis on development quality as well as improving people’s livelihoodsThe industrial sector is the cornerstone for absorbing effective investments; thus, there’s a need to accelerate the strategic deployment of investments in emerging and future industries, tapping into disruptive and cutting-edge technologies for new growth nodesIt is crucial to establish a stock of effective investments that aligns with the development of new productive forces, ensuring a solid financial supply driven by innovationMoreover, support should be prioritized for the upgrade of traditional industries through intelligent transformation and network connectivity, fostering tangible capital accumulation that optimizes the supply structure of products and servicesIn areas such as agricultural modernization, the renovation of old urban neighborhoods, and the supply of public goods in service industries, local governments should be encouraged to innovate investment and development models, integrating market-oriented investment mechanisms to fill financing gaps.

Furthermore, there’s a pressing need to innovate project management models, enhancing the quality and efficiency of investment and financing

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Support for financial institutions should include mechanisms for loan crediting, asset securitization, and other means that facilitate a dual approach towards existing and new investments, enhancing the overall asset operation capacity of societyParticularly, focus should be placed on core processes such as technological innovation, technology application, and the transformation of results, with an emphasis on critical fields involving technological upgrades, equipment renewal, capacity enhancement, and breakthroughs in "bottleneck" technologiesThis would activate the comprehensive effects of investment and financing through revitalizing existing assets, injecting new resources, and boosting kinetic energyIt is also encouraged for enterprises and research institutions to collaborate in joint ventures, explore innovative investment management models, including self-innovative technology investments, joint innovation funds, and private equity funding, and jointly tackle common industry technologies

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Establishing "joint innovation funds" can facilitate a “reverse mixed reform” mechanism to help technology application businesses screen, cultivate, and assimilate high-tech enterprises across various ownership structures, ultimately accelerating the accumulation of innovative capital.

Breaking down institutional barriers in industries is essential for creating a fair investment environmentAs of 2023, China registered 184 million business entities, with private fixed asset investments accounting for 50.4% of the totalPrivate investment should not only be considered an indicator of economic vitality but is progressively becoming a vital supporting force in stabilizing effective investments and promoting economic transformationIt is crucial to lower the entry threshold for private investment, encouraging its participation in key sectors such as transportation, water conservancy, clean energy, new infrastructure, advanced manufacturing, as well as agriculture and rural areas