Nurturing new quality productive forces will be a process of ‘creative destruction’

At present, China is cultivating emerging industries, building future industries, and developing new quality productive forces. However, there are concerns that because emerging industries are highly capital-intensive, excessive investment may result in overcapacity that wastes investment and triggers international trade disputes.

If well managed, the aforementioned problems of this process of “creative destruction”, as economist Joseph Schumpeter termed it, can be resolved or avoided.

Judging from the history of the 1970s, this process, in which new innovations replace and make obsolete older innovations, has taken two routes. One route is shown by the rise of Japan’s semiconductor and electronics industry, which led to a trade war with the United States. The other is the information technology revolution in the US.

The innovation process of exploring new technologies and new industries is a risk-taking process for entrepreneurs. There is inevitably a lot of trial and error, and certain new technologies will also be subject to competitive investment.

In addition, the process of “creative destruction” is also a stage for technological competition between major powers, which in turn is an external driving force for creative destruction.

The main feature of great power competition is that governments use fiscal funds and government procurement to fund large-scale scientific and technological research and development. The technological innovations of the US, the former Soviet Union, Japan and other major economies are all the outcome of government-funded research and development in the process of competition.

Therefore, there is no need to worry about over-investment in innovation fields and emerging industries. But it is necessary to avoid the old production capacity structure affecting the enthusiasm for creative destruction. So in addition to industrial transformation and upgrading based on application innovation, China must also pay attention to new technological revolution, and be prepared for the elimination of old technologies and production systems at the same time.