After more than 30 years of rapid growth, China has reached another turning point in its development path when a second strategic, and no less fundamental, shift is called for. The 12th Five-Year Plan provides an excellent start. This report combines its key elements to design a longer-term strategy. Six important messages emerge from the analysis:First, implement structural reforms to strengthen the foundations for a market-based economy by redefining the role of government, reforming and restructuring state enterprises and banks, developing the private sector, promoting competition, and deepening reforms in the land, labor, and financial markets. As an economy approaches the technology frontier and exhausts the potential for acquiring and applying technology from abroad, the role of the government and its relationship to markets and the private sector need to change fundamentally. While providing relatively fewer "tangible" public goods and services directly, the government will need to provide more intangible public goods and services like systems , rules, and policies, which increase production efficiency, promote competition, facilitate specialization, enhance the efficiency of resource allocation, protect the environment, and reduce risks and uncertainties.Second, accelerate the pace of innovation and create an open innovation system in which competitive pressures encourage Chinese firms to engage in product and process innovation not only through their own research and development but also by participating in global research and development networks. China has already introduced a range of initiatives in establishing a research and development infrastructure and is far ahead of most other developing countries. Its priority going forward is to increase the quality of research and development, rather than just quantity. To achieve this, policy makers will need to focus on: increasing the technical and cognitive skills of university graduates and building a few world-class research universities with strong links to industry; fostering " innovative cities" that bring together high-quality talent, knowledge networks, dynamic firms, and learning institutions, and allow them to interact without restriction; and increasing the availability of patient risk capital for start-up private firms.Third, seize the opportunity to " go green" through a mix of market incentives, regulations, public investments, industrial policy, and institutional development. Encouraging green development and increased efficiency of resource use is expected to not only improve the level of well-being and sustain rapid growth, but also address China's manifold environmental challenges. The intention is to encourage new investments in a range of low-pollution, energy-and resource-efficient industries that would lead to greener development, spur investments in related upstream and downstream manufacturing and services, and build international competitive advantage in a global sunrise industry. These policies have the potential to succeed, given China many advantages—its large market size that will allow rapid scaling up of successful technologies to achieve economies of scale and reduced unit costs, a high investment rate that will permit rapid replacement of old, inefficient, and environmentally damaging capital stock; its growing and dynamic private sector that will respond to new signals from government, provided it gets access to adequate levels of finance.