Constraints of resources, energy, and raw materials

Rapid increase in resource costs, and limited energy and raw materials cannot support the blind development of low-level, high-energy consumption and high consumables industry. The per capita possession of resources of China is obviously insufficient. The per capita possession of many key resources such as energy, water resources, land resources, and mineral resources is only half or less than the world average. China’s dependence on foreign oil is relatively high. To ensure oil security is a major challenge for China. From the perspective of mineral resources, the per capita possession of 45 major mineral resources in China is less than half of the world average. From the perspective of water resources, China’s per capita water resources is one-fifth of that of the United States and one-fiftieth of that of Canada, and the distribution of water resources in China is uneven. The layout of water resources and productivity do not match each other. Its time distribution during the year is uneven, the inter-annual variations are large with more droughts and floods, and the economic and social needs are not synchronized. With the improvement of social life and continuous economic development, the contradiction between life, production, and ecological water use has become increasingly prominent. In sharp contrast with this resource situation, in recent years, the proportion of China’s resource consumption in the world’s total consumption has been among the highest in the world.

It can be said that in the future development of China, breaking through energy, resources, and environmental constraints has become the most pressing issue. In particular, compared to other fields, the issue is more serious, considering the availability of the main energy sources and the limited resources and the irreversibility of large-scale environmental destruction. In order to change this situation, we must give top priority to the development of science and technology in China in the future through achieving breakthroughs in energy, resources, and environmental bottlenecks, relying on scientific and technological progress and innovation, changing the mode of economic development, achieving a resource-saving economy from a resource-consuming economy, and shifting from ignoring the growth of the environment to the environment-friendly growth. Otherwise, as pointed out by Hu Jintao in his speech to the Fourth Plenary Session of the 16th Central Committee of Communist Party of China in September 2004, if the fundamental mode of economic growth is not changed, energy would be unsustainable and the ecological environment would be overwhelmed. In that way, not only cannot we account to the people, neither can we account to history and to future generations.

Constraints of external situation and the international competitive environment

Developed countries, based on their technical standards and ecological environment standards as a market barrier, prevent China’s industrial products from entering their domestic markets. China’s exports of industrial products with comparative advantages are subject to increasingly serious challenges. For a long time, the extensive mode of development has seriously hampered the innovation capability of China and has affected the international competitiveness of Chinese enterprises and industries. In the field of manufacturing, at present, China has been ranked first in the world in terms of output of more than 80 kinds of products, and some products account for 80% of the world’s total output. China has jumped to the third place in the world trade volume. However, most of these products are high- consumption, low value-added products and their potential to expansion on the traditional scale has been very limited. The service industry in China has a low share in the national economy with a low technological level in the industry and a laggard development in the modern service industry. Especially after China’s accession to the World Trade Organization, the service industry in China is increasingly facing a powerful impact from abroad.

At present, China’s comparative advantage in international competition mostly stems from the low labor costs and the synergies between the two major markets at home and abroad. Not only the technological innovation capability of enterprises is relatively weak and the dependence of foreign technology on major national industries remains high, but the productivity of industries is much lower than that of advanced international level. According to a report by the World Bank in 2001, China and the Knowledge Economy: Seizing the 21st Century, statistics show that in the 1990s, China’s agricultural labor productivity was 5% of that of the United States and France, and its labor productivity in the manufacturing sector was less than 5% of that of the United States and France.

With changes in China’s economic development, market supply and demand, as well as changes in the international competitive landscape, through technological innovation to enhance industrial competitiveness, and actively cultivate new comparative advantages and competitive advantages of China’s industry, has become the key to the healthy development of China’s industry. As a large developing socialist country with rapid economic growth, China must change its mode of economic development and be based on independent innovation so as to seize the initiative of development and gradually take the initiative in international competition and cooperation.