The widening imbalance between consumption and exports in China’s economy has added fuel to critics’ charges of overcapacity. It led to the “China shock 2.0” theory being discussed at the World Economic Forum in Dalian, also known as the Summer Davos. China’s Premier Li Qiang used his opening speech at the plenary session of the forum to tackle the theory head-on, saying it is not grounded in fact and should be reworded as “China Opportunity 2.0”.

Li argued that China’s increasing competitiveness came from hard work and a recognition that there was no shortcut to scientific and technological research and development. He cited Huawei Technologies and Unitree Robotics to showcase the importance of R&D for innovation. The latter’s rapid growth from an initial valuation of 10 million yuan to an estimated 42 billion yuan (US$6.2 billion) once listed – in just 10 years – is a good example of how innovation can drive the economy. Such companies are increasing in number.

Whereas China in the past passed on the dividends of its investments to the world through low-cost goods, it now provides “innovation dividends” to global markets through its technological progress and industrial upgrades.

The premier’s spirited defence of China’s economic performance came after retail sales – a key gauge of consumer spending – fell by 0.6 per cent year on year in May, the first decline since the end of the pandemic. Meanwhile, exports rose by 19.4 per cent year on year in the same month, following a record-breaking trade surplus of nearly US$1.2 trillion last year, driven by a surge of low-cost, hi-tech exports such as electric vehicles. This has sparked alarm in Europe and elsewhere over the potential to affect local industries.

Li reassured foreign investors that China’s door would only open wider. But they should also realise that China has progressed from “made in China” to “created in China” and can now share the benefits of its own innovation.

While acknowledging the difference artificial intelligence makes, he said risks such as runaway technology and ethical lapses could not be ignored. He noted that “closer cooperation is the only way to drive innovation and confront diverse risks and challenges”, citing the sharing of China’s many open-source AI models, which benefits economic growth.