Three New Economies

I. “Three New Economies” become new growth tools

With the Chinese economy moving toward high quality-oriented development from being manufacturing- and export-driven, the focus is on nurturing three "new economies"—new industries, new formats and new business models.

They are based on innovation with digitalization, big data, artificial intelligence (AI) and online retail spurring them on. Their growth has been remarkable, especially during the novel coronavirus epidemic, when many traditional sectors wilted.

In 2017, their growth value was 15.7 percent of the GDP. In 2019, it went up to 16.3 percent, or 16.19 trillion yuan ($2.32 trillion), the National Bureau of Statistics (NBS) announced on July 7. The growth rate calculated at current prices was 9.3 percent, 1.5 percentage points higher than the GDP growth in the same period.

1.1 Economic stabilizer

New industry refers to using new scientific and technological achievements and new technologies to attain a certain scale of new economic activities. It includes the new industry directly generated by the industrialization of new technology application; by the traditional industry adopting modern information technology (IT); and by the promotion and application of scientific and technological achievements and IT.

New business format refers to the new links, chains and activities derived from the existing industries and fields by meeting diversified and personalized product or service demands by harnessing technological innovation and application. It includes business activities based on the Internet; innovation of business process, service mode or product form; and more flexible and fast personalized services.

New business model refers to the integration and reorganization of an enterprise's internal and external elements of operation to achieve customer value and sustainable profit and form an efficient and competitive business operation mode. Specifically, it includes integrating the Internet with industrial innovation, integrating hardware into service, and providing one-stop consumption, entertainment and leisure services.

The added value of the primary industry of the three new economies in 2019 was 668.5 billion yuan ($95.64 billion), accounting for 0.7 percent of the GDP; the added values of their secondary and tertiary industries stood at 7.04 trillion yuan ($1.01 trillion) and 8.48 trillion yuan ($1.21 trillion), equivalent to 7.1 percent and 8.6 percent of the GDP respectively, according to NBS figures.

"Development of the three new economies represents a very active achievement in supply-side structural reform," Zhang Liqun, a researcher with the Department of Macroeconomic Research in the Development Research Center of the State Council, China's cabinet, told People's Daily. According to him, the development of the trio in 2019 showed that the supply-side structural reform has been effective in an all-round way. The rise of three new economies has not only stabilized economic growth, but also served as a new powerhouse for China's economic and social development.

"Fresh food e-commerce, big data, bio-pharmaceutical, AI as well as Internet-based marketing and online education are some of the new business formats and models that have demonstrated remarkable advantages since the outbreak of the novel coronavirus," said Huang Zhengxue, head of the regional economy office of the Institute of Spatial Planning and Regional Economy under the National Development and Reform Commission, in an interview with China Economic Times. He said such new tools will become new drivers of economic growth, addressing difficulties in social development, such as stabilizing and expanding employment.

1.2 Facilitating transformation

By fully making use of the Internet and IT, the trio has facilitated transformation of traditional industries. The advanced manufacturing industry is a good example of the combination of new technology and traditional manufacturing. Examples of the industry are special equipment for semiconductor devices, wearable smart devices and unmanned aerial vehicles.

The three new economies benefited a lot from the macro-economic climate in 2019, leading to their rapid upsurge. In 2020, with the epidemic affecting the overall economy, especially the service sector, the three new economies are no exception but we can see that they are better able to resist risks. For instance, online offices have facilitated resumption of work and production, online education kept students learning during school disruption, and e-commerce experienced vibrant growth. They have become an important part of the Chinese economy and a new and vigorous force.  As they grow, they will better support rework and economic resumption in China.

Long Haibo, Deputy Director of Innovation and Development Department at the Development Research Center of the State Council, said during the epidemic, in particular, many new business formats and business models have grown very rapidly, which has increasingly driven the growth of the new industries. However, the contributions of the three new economies to different industries vary a lot.

They have contributed the most to the tertiary industry, which mainly relies on the digital transformation of consumer services. Next comes their contribution to the manufacturing industry, with digital transformation bringing in great potential. In comparison, they contributed the least to agriculture, or the primary industry.

In the future, however, they are likely to help establish more emerging industries featuring multi-industry integration, Long told Securities Times. He also said they can create more market demand and on the other hand, attract more people to work in the sectors generated by them since their values have increased substantially.

In recent years, some new categories of employees, such as live-streaming salespersons and delivery men, have been rated by some local governments as high-profile professionals, which affirms the social value of the three new economies.

2. “Three New” Economic Added Value in 2022

After accounting, the economic added value of China’s “Three New” in 2022 was 21,008.4 billion yuan, an increase of 6.5% over the previous year (without deducting price factors, the same below), 1.2 percentage points higher than the growth rate of Gross Domestic Product (GDP) in the same period at current prices; the proportion equivalent to GDP was 17.36 percent, an increase of 0.11 percentage point over the previous year.

Accounting Results of “Three New” Economic Added Value in 2022 

Annotations:

 I. Explanatory Notes

 The “Three New” Economy is a collection of economic activities with new industries, new business formats, and new business models as the core content.

 New industries refer to new economic activities of a certain scale formed by the application of new technological achievements and emerging technologies. It is specifically manifested as: new industries directly driven by the industrialization of new technology applications; new industries out from traditional industries supported by modern information technology; new industries derived from the differentiation, upgrading, and integration of industries promoted by the application of scientific and technological achievements and information technology.

 New business formats refer to new links, new chains, and new activity forms derived from existing industries and fields by complying with diversified, pluralistic, and personalized product or service demands with the boost of technological innovation and application. It is specifically manifested as: business activities carried out based on the Internet; innovation in business processes, service models or product forms; availability of more flexible and efficient personalized services.

 New business models refer to efficient and uniquely competitive business operation models by the integration and restructuring of various internal and external factors of enterprise operation to realize user value and achieve sustainable profit goals. It is specifically manifested as: integration of the Internet with industrial innovation; integration of hardware into services; availability of one-stop services for consumption, entertainment, leisure, and services.

 The added value of the "Three New" Economy measures the added value created by all the permanent units of a country (or region) engaged in the "three new" economic production activities in a certain period of time.

II. Accounting Coverage and Classification

 The accounting coverage of the added value of the “Three New” Economy is determined in accordance with the Statistical classification of New Industry, New Business Format and New Business Model (2018).

 The classification on the three industries of the added value of the “Three New” Economy is formulated in accordance with the regulations issued by the National Bureau of Statistics of China in 2018 regarding the classification of the three industries. The primary industry of the “Three New” Economy refers to agriculture, forestry, animal husbandry and fishery (excluding agricultural, forestry, animal husbandry and fishery majors and auxiliary activities) with the “Three New” Economy characteristics; the secondary industry of the “Three New” Economy refers to mining industry (excluding mining major and auxiliary activities), manufacturing industry (excluding manufacture of metal products, the machinery and equipment repair industry), production and supply of electricity, thermal power, gas and water with the “Three New” Economy characteristics; and the tertiary industry of the “Three New” Economy refers to other industries (excluding international organizations) with the “Three New” economy characteristics, except the primary and secondary industries.

III. Accounting Methods and Data Sources

 The added value of the "Three New" Economy is calculated from the production side, by using various kinds of methods to account, such as value-added rate and relevant index calculation with the data from the national economic census, the statistics data of the "Three New" Economy and the national economic accounting data.

VI. The Added Value of the “Three New” Economy is Equivalent to the Proportion of GDP

 The added value of the “Three New” Economy is equivalent to the proportion of GDP and calculated with the calculation of the added value of the “Three New” Economy and preliminary accounting of GDP of that year.

Source: < https://m.china.com.cn/wm/doc_1_29303_1707078.html >

<www.stats.gov.cn/english/PressRelease/202308/t20230803_1941761.html>

Edited by Bao Lianying