Development of China’s economy in the first quarter indicates promising prospects as the nation heads for economic upgrades while embracing innovation and creating new driving forces.

At the opening stage of the 13th Five-Year Plan, China’s economy is shifting to medium-to-high growth and economic structures are further optimized.

Innovation to bloom

Market reform created fertile soil for innovation. In recent years, driven by a new generation of information technology, high-tech industries witnessed swift development.

Huawei, a Shenzhen-based high-tech company, is a vivid example of China’s innovation-driven economic development, as it was listed 13th among the 50 global innovation companies by a US magazine, Fast Company.

Zhongguancun, another high-tech hub, is regarded as a forefront of innovation in China. Based in Beijing, the innovation hub is extending its focus from “Internet Plus business” to new sectors such as artificial intelligence, new materials, and new medicine.

“New ways of innovation is being forged,” said Sui Zhenyang, vice mayor of Beijing.

The nation is also making efforts to boost mass entrepreneurship and innovation as 14 national-level innovation demonstration zones have been established so far. In the first quarter this year, more than 3 million companies were registered, a 10.7 percent year on year growth.

“China has become the largest place that gathers entrepreneurship investment, second to the United States,” said Lin Nianxiu, deputy director of the National Development and Reform Commission.

Streamlining and reduction to inject vigor

To stimulate market, the government has been streamlining administrative powers. It has set up tests for a new negative list that enables more players to enter the market. Also, the registration process of new companies has been simplified as it takes only three days to register a new company, 23 days shorter than before.

Another effort is reducing overcapacity. As the top priority of supply-side reform, overcapacity reduction doesn’t mean simply “subtraction”. In fact, reduction will be done along with industry upgrades.

For example, Xuzhou Coal Mining Group is planning to cut down production of 7.9 million tons of coal this year, but the century-old coal enterprise is stepping into new sectors of lithium battery, numerically controlled machine tools, and 3D printing.

In addition, the government also is making efforts to reduce costs as it has carried out reforms regarding replacement of business tax with value-added tax, clearing government funds, and lowering social security premiums. Such moves will reduce financial burdens of 500 billion yuan ($76.9 billion), 26 billion yuan ($4 billion), and 100 billion yuan ($15.4 billion), respectively.

Exploiting new potential

The economic dynamic in the first quarter shows major and promising transformation of China’s economy and indicates huge development potential of the world’s second-largest economy.

The added value of the tertiary industry accounted for 56.9 percent of GDP, a 2 percent year-on-year growth. Industry and investment growth in central and western regions went faster than in the eastern region.

Furthermore, consumption contributed more than 60 percent of economic growth, and online retail saw a 30 percent year-on-year increase amid robust development of industries such as tourism and health care.

Despite downward pressures, China was able to create more jobs. The credit largely goes to domestic consumption and service industry.

Regional gaps as well as the urban-rural gap remain huge, which means huge development potential under the context of new-type industrialization, informatization, urbanization and agricultural modernization.

In urbanization, a one percentage point increase rate will drive 3.7 points in investment growth and 1.8 points in consumption increase.

Considering all aspects, China’s economy is running steadily. And that’s why IMF has recently raised expectations for China’s economic growth over the next two years.