A dynamic computable general equilibrium simulation of China’s innovation-based economy under the new normal

Researching China’s innovative economic and financial innovation issues under the background of the New Normal, we need to carefully analyze the internal structure and interaction of China’s macroeconomics. The computable general equilibrium (CGE) model has outstanding advantages on predicting the external shock influences on economic system, but previous studies on forecast for China’s future economy mostly considered a high growth rate which is hard to comply with the New Normal scene. By constructing China’s macroeconomic dynamic CGE (DCGE) model and anticipating the economic impact of the New Normal, this paper finds that the New Normal has a certain extent inhibition on China’s macro-economy and innovation. However, after adding the research and development (R&D) subsidy policy, the negative impacts of the New Normal on macro-economy can be eliminated to realize the optimization of economic structure. In addition, after combining the financial innovation promoting policy and the KeQiang index through the simulation of macro-economy, we find that the quality of economic growth is improved. Finally, we provide the policy recommendations for the realization of an innovative economy under China’s New Normal.