The global economic landscape is undergoing profound restructuring. As major economies repeatedly fall into the "stimulus-rebound-weakening" fluctuation cycle during the pandemic recovery, and as the marginal benefits of quantitative easing and fiscal stimulus continue to diminish, a fundamental question has emerged: Has the underlying logic driving economic growth undergone a systemic shift? Over the past decade, multiple rounds of quantitative easing by the Federal Reserve have failed to replicate the V-shaped recovery seen after 2008. The Eurozone's negative interest rate policy has quietly faded during the energy crisis. Japan's ultra-loose monetary policy has consistently failed to achieve the 2% inflation target. These phenomena collectively point to a confusion within the economics community: Why has the classical model, based on the input of production factors, become increasingly difficult to use to explain the growth dynamics of the real world?
This disconnect between theory and practice is particularly evident in China's economic transformation. In 2024, fixed asset investment across the whole society grew by 3.2%, retail consumption grew by 3.5%, and the goods trade surplus hit a new high of USD 767.9 billion. According to the traditional "three pillars (investments, consumptions, exports)" model, this should have resulted in a strong recovery. However, the subjective experience of micro-level entities sharply contrasts with the macro data. The manufacturing PMI has been below the threshold for five consecutive months, youth unemployment remains high, and the capital market's risk appetite continues to stay low. This paradox suggests that latent variables, not captured by traditional models, are reshaping the economic system.
In this context, ANBOUND's senior researcher proposed ANBOUND's Economic Growth Model, creating a new observational dimension. This model groundbreakingly incorporates the relationships between three key factors: technology, reform, and culture, into the analysis framework. While global central bank governors are still debating the end point of interest rate hikes, this model has quietly revealed that the essence of modern economic growth has already evolved from a "quantitative approach" driven by factor accumulation to "ecoefficiency" based on system coordination.
Specifically, ANBOUND's Economic Growth Model builds upon the traditional "three pillars" framework and constructs an analytical framework of "three bases and three multipliers", deconstructing economic growth into three fundamental indicators: investment, consumption, and net exports, as well as three multiplier coefficients: technology, reform, and culture. The first three indicators serve as direct statistical measures of economic output, reflecting the data relationships and manifesting as explicit economic momentum. The latter three represent multiplier effects, showing coefficient relationships that amplify or diminish the impact of the first three, together forming the dynamic system of economic growth. This reveals the complexity of economic growth, especially in the current context of China's economic transformation. Ignoring the regulation of coefficient relationships could lead to policy design falling into the problem of treating symptoms but not the root causes.
From the perspective of the theoretical lineage of economics, traditional growth models, such as the Solow-Swan model and New Growth Theory, primarily focus on the interaction between the input of production factors and technological progress, with little consideration of the institutional variables specific to China. The unique value of ANBOUND's Economic Growth Model lies in its ability to integrate not only the classical theories on capital, labor, and technology but also the role of government actions through reform and cultural factors within the system.
For example, through reform and innovation, the Chinese government can strengthen areas such as fiscal policy, industrial planning, and institutional innovation. This can directly stimulate investment (such as infrastructure projects), indirectly boost consumption (such as tax reductions to promote domestic demand), and even reshape the structure of net exports (such as the Belt and Road Initiative, BRI). Therefore, it is important to emphasize that ANBOUND's Economic Growth Model is not a simple extension of traditional quantitative economic models. Its core lies in revealing the driving logic of economic growth through system coordination, facilitating the design of policies that can effectively stimulate economic growth.
Between 2000 and 2024, China continued to rely on investment-driven growth in the face of external shocks, but this approach to regulation often came with side effects such as overcapacity and mounting debt. The root cause of this lies in the lack of deep consideration for reform to optimize investment efficiency. If policy returns are solely focused on short-term GDP numbers, while neglecting long-term goals such as industrial chain security and technological autonomy, it could lead to a vicious cycle of "investment - unfinished projects - re-investment". This has already led to profound lessons in areas like semiconductor manufacturing and the photovoltaic industry.
The key to breaking this dilemma lies in the coordination of the three multiplier coefficients, namely technology, reform, and culture in ANBOUND's Economic Growth Model.
First, technological innovation, as the core variable of the coefficient relationship, plays a crucial role through multiple pathways. According to ANBOUND Technology Innovation Transforming Productivity Model as discussed by ANBOUND's founder Kung Chan, the multiplier effect of technology on the economy can be realized through three modes: industry returns, policy returns, and capital returns. Taking industry returns as an example, China's manufacturing sector has enhanced its value added per unit of investment from RMB 1.8 / RMB invested in 2012 to RMB 2.4 / RMB invested in 2024, which is empirical evidence of the technology coefficient amplifying investment effectiveness.
However, the capital return pathway faces significant distortions in China. The technology sector in A-share has been systematically overvalued in terms of price-to-earnings ratios, and although the registration system reform has accelerated the IPO process, the market's focus on "financing over investment" has resulted in capital being unable to effectively nourish the real economy. This highlights that the activation of the technology coefficient relies not only on the intensity of research and development investment, with China's R&D expenditure as a share of GDP in 2024 is 2.7%, but also on accompanying institutional reforms to streamline the transformation chain from "laboratories - capital markets - industrial applications".
Secondly, the economic value of the cultural coefficient is often underestimated, yet it is closely related to consumption. It deeply participates in economic operation through implicit mechanisms such as shaping consumption preferences, brand premiums, and innovation ecosystems. On the demand side, the role of cultural identity in driving consumption upgrades has become increasingly significant. For instance, the market share of Chinese trendy brands in areas such as clothing and cosmetics has risen from 28% in 2018 to 47% in 2024. Behind this shift is the cultural coefficient reshaping the consumption logic of "Made in China - Chinese Brands - Chinese Values".
On the supply side, cultural factors indirectly influence total factor productivity by affecting the quality of human capital. For example, the localization of "craftsmanship spirit" in the Yangtze River Delta region has resulted in a patent conversion rate for high-end equipment manufacturing that is 12 percentage points higher than the national average. More profoundly, the cultural coefficient factor also defines the ethical boundaries of economic growth. When the concept of "nature is wealth" is translated into institutional practices such as carbon trading markets and environmental, social, and governance (ESG) investments, culture becomes the underlying operating system that harmonizes growth with sustainability.
Finally, the effectiveness of the reform coefficient is primarily reflected in its ability to optimize the coordination of the three key data relationships. Taking China's new energy vehicle (NEV) industry in 2024 as an example, the government implemented a series of combined policies, such as phasing out subsidies (adjusting the consumption coefficient), financing for charging infrastructure REITs (leveraging social investment), and strategic reserves of lithium resources (stabilizing net export costs). As a result, the industry saw an 18% growth in fixed asset investment, while the consumer market penetration increased to 35%, and exports of power batteries surpassed USD 12 billion. The success of this multi-objective coordination lies in the government's shift from being a "direct intervener" to a "system operator". For instance, the country's Ministry of Finance prioritized special bond funding to support the construction of tech parks, the National Development and Reform Commission (NDRC) released space for private investment through its negative list management, and the cultural department's IP incubation programs promoted cultural and tourism consumption. After the cumulative effect of these various policy tools, the economic benefits generated far exceeded a simple sum of individual measures.
Currently, the key to breaking through China's economic challenges lies in how to rebalance the coefficient relationships under the "threefold pressure". On the investment side, the use of local government special bond funds needs to shift from "quantity" expansion to "quality" improvement, enhancing the industrial relevance of new infrastructure through the infusion of the technology coefficient. On the consumption side, the cultural coefficient should focus on resolving the people's paradox of "having income but not daring to spend", in order to unlock medium- to long-term potential by fostering emerging business models like those catered for senior citizens and immersive experiences. On the net export side, the reform coefficient needs to reshape the BRI cooperation model, turning cultural identity into institutional public goods, such as mutual recognition of standards and co-governance of intellectual property.
Crucially, these three coefficients are not independent. Technological breakthroughs rely on government-led basic research investments, such as reforms. Cultural soft power construction needs to be empowered by technological means. Meanwhile, the improvement in government governance resulting from reforms is closely linked to institutional innovations within a cultural context. This interconnectedness requires that policy design go beyond departmental perspectives and seek the optimal solution within the interactive framework of "technology-reform-culture".
In this regard, ANBOUND's Economic Growth Model provides a systematic foundation for understanding China's 15th Five-Year Plan, as well as creating a more potential-driven, flexible window for correctly assessing the future prospects of the country's economic growth. Therefore, this model is not intended for academic purposes alone, but rather to define the future trends of economic growth, creating the necessary conditions and opening up pathways for that future development.
Final analysis conclusion:
Looking through the perspective of the new stage of high-quality development, the practical significance of ANBOUND's Economic Growth Model is becoming increasingly evident. It signals to decision-makers that economic growth is not just a "data race" but also a "coefficient revolution". As the marginal returns of traditional growth drivers decline, breakthroughs in technology to push the productivity frontier, reforms to reconstruct incentive-compatible mechanisms, and culture to activate social capital will become key to overcoming the middle-income trap. Historical experience shows that any single dimension of growth faces a ceiling. The United States' over-reliance on capital returns has led to industrial hollowing out, while Japan's technological strength has been constrained by cultural isolation, which weakens its innovation vitality. China's path to breaking through lies in leveraging its institutional advantages to weave a "six-dimensional network", deeply integrating the sharpness of technology, the precision of reform, as well as the cultural aspect.
______________
Yang Xite is a Research Fellow at ANBOUND, an independent think tank.
