The internal engines of China’s high-quality modernization can also help drive the development of the Global South

This year’s two sessions — the annual meetings of China’s top legislative and political consultative bodies — reinforced a trend that has become increasingly clear over the past decade: China has entered a new stage of economic development defined not only by quantitative expansion but by the structural quality of its growth. The government’s economic growth target of 4.5 to 5 percent for 2026 reflects a broader transformation that integrates technological innovation, strengthened domestic demand and continued institutional modernization. This transformation does not affect China alone. It also reshapes economic cooperation, innovation dynamics and development financing across the Global South.

A close reading of this year’s Government Work Report reveals three internal engines that sustain this transformation.

The first engine of high-quality development is the growing strength of China’s domestic market.

In recent years, China has rebalanced its economic strategy. The country still participates deeply in global trade, but Chinese policymakers now also place emphasis on domestic demand as a key driver of sustainable growth.

Recent data from the National Bureau of Statistics illustrate this shift. In 2025, China’s economy expanded by 5 percent, reaching a total GDP of 140.19 trillion yuan ($20.33 trillion). During the same year, the country created 12.67 million new urban jobs, while total retail sales surpassed 50 trillion yuan.

These figures reflect the enormous scale of China’s internal market. With a population of roughly 1.4 billion people, China now possesses one of the largest domestic demand bases in the world. The government continues to expand this potential through policies that increase household income and modernize consumption patterns. The latest data from the Ministry of Commerce showed programs that encourage consumers to replace old goods with newer products have already generated more than 2.6 trillion yuan in sales, supported by special long-term treasury bonds.

A stronger domestic market produces an important macroeconomic effect. It increases the resilience of the Chinese economy in a volatile global environment and reduces dependence on external cycles. For many developing economies, China’s experience also demonstrates how governments can combine consumption stimulus with social inclusion and middle-income group expansion.

The second engine of China’s high-quality development is technological innovation. Over the past two decades, China has transformed its industrial structure. The country has moved beyond its earlier role as a manufacturing platform for low-cost production, investing heavily in science, technology and innovation.

According to the Ministry of Science and Technology, national spending on R&D reached 2.8 percent of China’s GDP in 2025, while the value of technology contract transactions increased by 10.8 percent. High-tech manufacturing expanded by 9.4 percent, and industrial robot production grew by 28 percent.

New strategic industries have also expanded rapidly. According to the China Association of Automobile Manufacturers, China produced more than 16 million new energy vehicles in 2025, while the number of electric vehicle charging stations nationwide has exceeded 20 million.

The digital economy has also grown quickly. It is said in this year’s Government Work Report that core digital industries have already accounted for more than 10.5 percent of China’s GDP in 2025. Policymakers aim to further enhance the sector over the coming five years, according to the outline of the 15th Five-Year Plan (2026-30).

These developments illustrate the rise of what Chinese policymakers describe as new quality productive forces. This concept combines digitization, artificial intelligence, industrial automation and green technologies.

Programs such as the “AI+” initiative promote large-scale applications of AI across sectors that range from manufacturing to public services. At the same time, China is directing major investments toward frontier technologies including quantum computing, biotechnology, satellite systems and next-generation communications networks.

These technological advances increasingly influence the global economy. As China strengthens its innovation capacity, it consolidates its position as one of the world’s leading centers of technological development while creating new opportunities for cooperation in digital infrastructure, renewable energy and industrial modernization.

The third engine of high-quality development is the institutional capacity to coordinate economic transformation.

Over several decades, China has built a governance model that combines long-term strategic planning with market mechanisms. This institutional structure enables policymakers to rapidly mobilize public and private resources in sectors they identify as national priorities.

Recent macroeconomic policy illustrates this approach. In response to global economic challenges and growing trade tensions, the Chinese government adopted a more proactive fiscal policy and maintained a moderately accommodative monetary policy. The authorities have implemented measures to reduce financing costs, expand funding for strategic projects and support industrial technological upgrading.

Coordination among different levels of government also plays a crucial role. Policymakers have directed significant investments toward modern infrastructure, technological innovation and rural vitalization.

Meanwhile, policymakers continue to deepen institutional reforms to form a unified national market, reduce regional barriers and expand private-sector participation in strategic projects. This capacity for coordinated policymaking enables China to allocate national resources to sectors that drive long-term development.

As China enters the 15th Five-Year Plan period, China’s transition toward high-quality development carries significant implications for the Global South.

First, China’s expanding domestic market creates new trade opportunities for emerging economies. As Chinese households increase their incomes and diversify their consumption patterns, demand grows for agricultural products, food supplies, natural resources and services from developing countries.

Second, China’s leadership in green and digital technologies opens new paths for international cooperation. China now ranks among the world’s largest producers of EVs, solar panels and energy-storage batteries. These technologies play a critical role in the global energy transition and can support sustainable development across many regions. Concrete examples already appear in infrastructure projects in Latin America and smart-city initiatives in several African countries, where Chinese technology has been adapted to local development needs.

Third, financial cooperation represents another important dimension. China mobilizes development funds, policy banks and long-term special bonds to support infrastructure and innovation in the Global South. Initiatives such as the Belt and Road Initiative, as well as cooperation mechanisms such as BRICS and the China-CELAC Forum, demonstrate how these instruments can strengthen economic cooperation among developing countries.

At the same time, this cooperation also presents challenges. Technological asymmetries and concerns about debt sustainability require transparent dialogue and financing structures that reflect the specific conditions of each partner country. Technology transfer must also include local capacity building so that other Global South economies can develop their own productive capabilities rather than simply import external solutions. For regions such as Latin America, this evolving landscape creates opportunities to build partnerships that extend beyond traditional trade into industrial cooperation, technological innovation and infrastructure development.

China’s recent experience demonstrates that economic growth and structural transformation can advance simultaneously. By combining technological innovation, domestic market expansion and strong institutional coordination, China continues to build a development model that emphasizes resilience and long-term sustainability. This process highlights the importance of public policies that integrate economic growth, social inclusion and productive modernization.

For the Global South as a whole, China’s trajectory offers not only new opportunities for cooperation but also valuable insights into development strategies in an increasingly complex international environment.

With R&D investment equal to 2.8 percent of GDP and a digital economy that already accounts for more than 10 percent of national output, China demonstrates that high-quality development represents far more than a political concept. It reflects a concrete process of economic transformation.

More importantly, this transformation extends beyond China’s borders. It increasingly shapes global economic dynamics and opens new avenues for cooperation. The central challenge now lies in how emerging economies can build partnerships that translate these changes into shared prosperity and sustainable development.

The author is the director of the China-Brazil Center for Research and Business. 

The author contributed this article to China Watch, a think tank powered by China Daily. The views do not necessarily reflect those of China Daily.

Contact the editor at editor@chinawatch.cn.