Work in Progress: China’s Next Five Year Plan

published on 2 November 2020 | reading time approx. 3 minutes

by Christina Gigler

China's top leaders met from 26 to 29 October 2020 in order to make proposals, discuss about and draft the economic and social policies and as well the strategic development plans for the next five years from 2021 to 2025. The five-year plan ("FYP") typically covers almost every economic and social issue and sets targets ranging from annual economic growth to pollution control, education, environmental protection and research and development spending.

This year's FYP will be the 14^th FYP since 1953. Every five years, government officials, advisers, academics and lawmakers spend several months debating the respective contents before the plans are finally published. At the end, the FYP needs to be given final approval by the country's top legislature, the National People's Congress, at its annual meeting that usually takes place in March.

The 13^th FYP (2016  – 2020) period was a decisive phase of achieving a moderately prosperous society in all respects in China, including the fight against poverty as well as all-around opening-up, new urbanization and modern infrastructure network.

What is already known about the next five-year plan

Communique released on 29 October

Last Thursday evening the Communist Party released the "Communique of the fifth Plenary Meeting of the 19th CPC Central Committee" ("Communique"), which contains a broad outline of the 14^th FYP and allows a first glimpse into the topics discussed during the four-day plenary session. In addition, the 14^th FYP also sets out long-term targets for the Chinese economy by 2035.

Dual Circulation

In the context of the 14^th FYP, the buzzword that has been mentioned and quoted the most in media so far is probably "dual circulation" (in Chinese: "双循环"). As has been expected due to its rising role in recent high-level meetings, this new "dual circulation" strategy of President Xi Jinping took center stage during the 14^th FYP.

Xi Jinping firstly unveiled the "dual circulation" at a Politburo meeting in May this year. Although no concrete details of the strategy are known to the public yet, broadly speaking, it involves increasing China's economic resilience ("internal circulation"), which means focusing on growing China's domestic market by, inter alia, boosting domestic consumption, while at the same time being supported by "external circulation", meaning maintaining China's export-led economic model.

Put simply, China wants to reduce its dependence on foreign countries in order to be well prepared and capable of dealing with growing trade restrictions and possible future sanctions of foreign countries. This strategy can, inter alia, be seen as a reaction to the ongoing trade conflict with the USA and the increasing hostility of foreign countries towards Chinese tech companies. For example towards the tech giant Huawei or the popular video app TikTok owned by ByteDance.

While some scholars criticize that this strategy can be seen as a step back from the recent opening-up policy of China, one could also say that "internal circulation" and "external circulation" shall rather complement each other and to deploy new synergy effects. In other words, the focus shall not only lie on expanding local output, but also on drawing in foreign investment and stabilizing trade in general. How exactly the "dual circulation" will be implemented in practice is still unclear. So far it is a more or less vague slogan. The term is therefore still open to interpretation.

Gross Domestic Product growth target

Furthermore, as expected, the 14^th FYP plays down Gross Domestic Product (GDP) growth as a major target and focusses more on a high-quality of growth instead of the mere speed, as the Chinese economy, like many others, is undergoing a structural slowdown as effect on Covid-19.

The annual average GDP target in the last FYP was set at "at least 6.5 percent," reduced from 7 percent in the 12^th FYP (2011 – 2015). There has been considerable debate about which target rate could be considered as appropriate for the 14^th FYP and whether the GDP growth target has outlived its purpose and should be removed altogether. Many economists assumed that in the 14^th FYP, the pace will fall to a range of around 5 percent to 5.5 percent. However, the Communique does not mention any specific numeric goal for GDP growth. Instead, the Communique sets a goal of GDP per capita reaching the level of moderately developed countries by 2035.

Control of carbon emissions

In line with the announcement of President Xi Jinping to reach carbon neutrality by 2060, the Communique calls for significant progress in controlling carbon emissions by 2035. Based on the Communique, the plenum called for promoting green development and harmonious coexistence between man and nature, giving priority to conservation, protection, and natural restoration, and protecting the boundaries of natural ecological security. In any case, this can be seen as a rather ambitious plan for China as the world's largest greenhouse gas emitter.

Other Topics

Beside the current topics also older ones, such as governance, play a crucial role again in the 14^th FYP.

In the framework of governance, strict compliance with implementation might be a compulsory course for grassroots governance in the future. For instance, the "Measures on Handling Complaints of Foreign-Invested Enterprises" ("Measures"), which have been effective since 1 October 2020, represent a step in the right direction. Based on these Measures, foreign-invested enterprises shall have a platform not only for complaints but also for suggestions for improvement towards the actions and detrimental treatment of authorities. Unlike before, a joint committee shall be established as national coordinator and top supervisory body of the complaints.

Furthermore, the plenum put forward that priority should be given to developing agriculture and rural areas and promoting rural revitalization. Other topics are related to national security, modernization of national defense and armed forces as well as improving the distribution of land, promoting coordinated regional development and a new type of urbanization.

Outlook

From the experience of the past years, a more detailed program of policies will be released after several weeks or even months after the plenary sessions. We will keep a close eye on the future development and update you on the crucial aspects of the new 14^thFYP (2021 – 2025).