On November 20, 2016, the 6th International Excellent Operations Annual Conference was successfully held in Jinji Lake, Suzhou. Entrepreneurs, experts, and scholars from multiple countries and regions attended one after another.

Famous economist and director of the US China Bilateral Research Institute, Xiang Songzuo, attended the event and also received an exclusive interview from NetEase.

NetEase: China has undergone four economic adjustments in 2012, but it is still not optimistic. Some even believe that China's economic winter has arrived. Facing the current situation, what level do you think China's economy is currently at?

Xiang Songzuo: From an economic perspective, there is usually an indicator to determine whether a country has completed its economic transformation. If a country's economy is mainly driven by the domestic market (the domestic market is broad, including residents' consumption and government consumption), that is, domestic consumption exceeds 70%, and exports to foreign markets are less than 30%, it indicates that the economy has shifted from export oriented to domestic oriented. If consumption is driven by more than 70%, it indicates a shift from investment driven to consumption driven. But the economic transformation we are talking about now is not based on the two shifts mentioned above. By 2020, the contribution of technology to economic growth will exceed 60%, so China's economic transformation has not yet been fully successful.

NetEase: Therefore, technology will become a new economic growth point?

Xiang Songzuo: Economic growth is usually an increase in labor productivity. Labor productivity usually consists of three major factors: land, labor, and technology. The basis for economists to measure economic growth mainly comes from factor investment and technology investment. And technology investment is essentially an efficiency issue, which involves converting the same raw materials into more products and services suitable for consumers to use. For example, the world's first computer, which was about a quarter the size of a football field, could not match the functionality of a small phone today. This is the magical power of technology. The second magical aspect of technology lies in its ability to significantly reduce energy consumption, which is also one of the biggest challenges of China's economic transformation - the average energy consumption per unit of GDP is about six times that of Japan.

NetEase: In the past, China's manufacturing industry mainly relied on extensive resource consumption, but now it constantly advocates technological innovation. Does this mean that it has realized the power of technology and has undergone a transformation?

Xiang Songzuo: China's economy has achieved its first leap. Through more than three decades of reform and opening up, it has made up for the first and Second Industrial Revolution. The main industries of these two industrial revolutions were traditional manufacturing industries (such as heavy industry, heavy chemicals, automobiles, electronics, etc.). These early stages were all energy consuming industries. So in the past 30 years, China has been a resource consuming, energy consuming, and human resource consuming development model, which is a "three low" development model (i.e. low labor costs, low factor costs, and low energy costs). With environmental pollution becoming increasingly severe and the urgent need to improve people's income, China's economic model needs to shift from a three low model, from a simple and extensive model that relies on factor investment, to a model that relies on technology. This is what the Prime Minister often talks about "increasing value and efficiency", and the key to "increasing value and efficiency" is technology.

NetEase: Based on what you said above, can we believe that "technological innovation can drive the second prosperity of China's economy"?

Xiang: It's not something that can drive, but it's the only way! There's no other way!

NetEase: Previously, when you attended a conference, you said, "The fundamental reason for China's economic problems is the lack of original creativity." So, what do you think is the current state of Chinese enterprise technology development?

Xiang Songzuo: Objectively speaking, in the more than thirty years of reform and opening up, our country has been catching up in almost all fields with great strides. It is an undeniable fact that the gap between China and developed countries is rapidly narrowing. And in the process of catching up, a relatively complete manufacturing system has been formed. What is a complete manufacturing system? All products in the world can be assembled from scratch in China, and few countries can achieve this.

In terms of technology, we have also caught up with the third (information technological revolution represented by the Internet and mobile communication) and the fourth industrial revolution (represented by big data, cloud computing, new energy and new materials). Some of these fields have even reached world advanced status, but it is equally undeniable that the gap still exists.

Where does technological progress come from? In the early stages of economic development, it can be achieved through introduction, purchase, digestion, and localization. This is the path that our country has taken over the past thirty years - exchanging technology through the market, leaving the market to others, but unable to learn core technologies. Therefore, the success of China's technological progress and economic transformation in the later stage must rely on original scientific and technological ideas.

NetEase: Is the Second Prosperity of the Chinese Economy Worth Expecting?

Xiang Songzuo: Of course it's worth looking forward to.   But what I emphasize is that prosperity is not easy to expect. While full of hope, there is a greater need for a sense of worry.