Opening Remarks at the 16th Annual International Conference on the Chinese Economy on “Beyond the Cycle: Growth, Innovation and Resilience of the Chinese Economy”

Professor He [Zhiguo], distinguished guests, ladies and gentlemen, good morning.

1. On behalf of the Hong Kong Academy of Finance and the Hong Kong Institute for Monetary and Financial Research, welcome to the 16^th Annual International Conference on the Chinese Economy. 
2. This year’s theme is “Beyond the Cycle: Growth, Innovation and Resilience of the Chinese Economy.” It invites us to look past the next quarterly figures and ask a bigger question: What will sustain China’s economic growth over the long run?
3. I would suggest that the key to long-term sustainability lies in technological innovation, structural upgrading, and the strengthening of domestic demand. To explore this, I will structure my remarks around the three dimensions as depicted in the theme: how these drivers influence growth, how they fuel innovation, and how they underpin resilience.

Growth: upgrading the model

4. Let me begin with economic growth.
5. China is accelerating its shift toward a high-quality growth paradigm, which is encapsulated in a five-dimensional framework encompassing innovation, coordination, green development, openness, and shared prosperity.
6. Central to this transformation is the conversion from old to new growth drivers – replacing traditional infrastructure and real estate reliance with advanced manufacturing, Artificial Intelligence (A.I.), green and digital industries. We observe that manufacturing has moved up the value chain to advanced production, while the services sector has expanded to support it. As these roles become more prevalent, household incomes rise. Along with continued industrial upgrade, this further underpins domestic demand as an important engine of growth.
7. Household wealth management is also evolving, driven by the continuous modernisation of the financial services sector and a more inclusive and diversified capital market. As a result, a greater share of household savings is allocated to capital market, which helps direct funding to support long-term industrial R&D and innovative ventures. This shift benefits everyone: households have better tools to grow and protect their wealth, while businesses gain access to stable, long-term funding from domestic sources, thereby supporting economic and social development in a more sustained manner.
8. This evolution is supported by a macroeconomic policy grounded in a long-term view. By focusing on both quality and quantity, the policy ensures that structural transformation and the rise of domestic demand converge to create lasting economic prosperity.

Innovation: the leading force

9. Innovation is the leading force in this transformation.
10. China has made relentless efforts over four decades to build its foundations. According to United Nations data, the country now boasts the world’s largest pool of researchers and the most complete industrial system globally.¹ Meanwhile, a vast digital economy has rapidly expanded from a quarter of GDP a decade ago to over 40% today.² When combined, these assets provide an unparalleled advantage.
11. Those foundations are now delivering at the frontier. Chinese A.I. models, for instance, have come within reach of the world’s best, at a fraction of the cost.
12. But innovation is only the beginning. The industrial system carries new technologies to end users; an open mindset accelerates adoption; and the size of China’s domestic market provides the scale needed for impact.
13. Diffusion is where innovation translates into growth. The early evidence is promising. More than 600 million people in China have already used Generative A.I., and Chinese factories account for more than half of the world’s new industrial robot installations.³ By harnessing the potential of the “new three”—electric vehicles, lithium-ion batteries, and solar panels—China is supporting a green transition that extends well beyond its borders.
14. This quest for innovation is people-centred. Technology elevates living standards, not just for its own sake. By ensuring that the gains from progress are accessible to all, the economy also builds a solid foundation for continuous innovation and high-quality growth.

Resilience: holding the trend

15. This brings me to the third dimension: resilience.
16. Innovation keeps pushing the limits of growth, but cycles will still come and go. Resilience is what enables us to navigate those cycles without veering off our long‑term trajectory.
17. The Chinese economy has been tested in recent years, by trade and technology tensions and by domestic economic adjustments. Despite the looming uncertainty, the overall growth trajectory has not substantially changed. This stability rests on the adaptive capacity of supply chains and the robustness of the financial system.
18. Supply chains have shown remarkable adaptability. Domestically, the Greater Bay Area and many other economic clusters across China offer unmatched speed, enabling manufacturers to source components within hours. Internationally, Chinese firms have moved upstream, supplying critical machinery and inputs to partner economies. This integration fosters robust, mutually beneficial partnerships. By diversifying across multiple regions and enhancing synergies with local networks, these supply chains maintain stability, even when individual chokepoints cause disruptions.
19. Similarly, the financial system has strengthened through deepened capital markets and robust regulation, ensuring stability and efficient capital flows to the real economy. This stability supports the continuing opening up of its financial system. One notable example is the internationalisation of the RMB. Over the last decade, the share of RMB settlements in China’s cross-border transactions has doubled, reaching more than half today.⁴ This shift reduces exchange‑rate risk for firms and investors, further consolidating the foundation for the high‑level opening up of the Chinese economy.
20. In both ways, economic and financial resilience serve growth directly.

Serving the blueprint

21. To turn growth, innovation, and resilience into tangible impact, we need two powerful enablers: strategic clarity and a dynamic financial ecosystem.
22. This year marks the launch of the 15^th National Five-Year Plan, serving as the central blueprint that provides strategic direction by explicitly addressing these three critical dimensions.
23. Regarding growth, the Plan prioritises the expansion of domestic demand by coupling investment in physical infrastructure with support for social infrastructure such as childcare, education, and pensions. Regarding innovation, it establishes a modernised industrial system as its foundation and drives innovation diffusion. Regarding resilience, the Plan calls for more secure supply chains and high-standard opening up.
24. These measures are designed to sustain high-quality economic development. However, scientific research, product development, and industrial upgrading are long-term commitments, whose returns may take years to materialise.
25. Consequently, finance must evolve to match these extended horizons. Relying solely on traditional financing approaches such as collateralised bank loans or policy lending may no longer be sufficient on their own. A diversified and robust finance ecosystem is necessary: one that brings together patient capital, specialised banking, and deep, liquid capital markets to meet increasingly diverse financing needs, all supported by rigorous and effective financial supervision.

Hong Kong’s contribution

26. Hong Kong can play a pivotal role in this evolution by facilitating long-term institutional capital to better serve the Chinese economy’s continuous transformation.
27. Last month, Hong Kong released its first Five-Year Plan. It aligns our strengths with national priorities and puts our status as an international financial centre at its core.
28. The Plan deepens financial connectivity with the Chinese Mainland, expands offshore RMB business and strengthens risk management capabilities. Hong Kong serves as a key node by upgrading its markets through broader participation, more robust liquidity, and future-ready infrastructure.
29. But Hong Kong’s role extends far beyond merely channelling capital. It serves as a launchpad for Chinese firms entering global markets. It also provides a gateway for global investors to China’s ongoing transformation.

Conclusion

30. The same two‑way exchange is the purpose of this conference. Over the next two days, the sessions will examine the relevant issues on growth, innovation and resilience.
31. I hope that the discussions will help us see the trend beyond the cycle. China’s capacity for innovation and its resilience give good reason for confidence in its long‑term economic growth. Hong Kong will continue to play its part.
32. Let me conclude by thanking all our speakers, panellists and participants and I wish the conference every success. Thank you.